Good News: India a “bright spot,” its economy to grow at 6.7% in 2024, says the UN

Virendra Pandit

New Delhi: Amid worldwide recessionary trends, hyperinflation in many countries, and the US economy threatened with a debt-cap crisis next month, the Indian economy has continued to perform exceptionally well among major nations and is now expected to grow at 6.7 percent next year, making it the fastest growing economy on the planet.

The United Nations’ report on the “World Economic Situation and Prospects” (WESP), as of mid-2023, released on Tuesday, said India’s economy, the largest in South Asia, is expected to expand by 5.8 percent in 2023 and 6.7 percent in 2024 (calendar years), supported by resilient domestic demand. 

According to the report, the world economy is now projected to grow only by 2.3 percent in 2023 (+0.4 percentage points from the January forecast) and 2.5 percent in 2024 (-0.2 percentage points), a slight uptick in the global growth forecast for 2023, the media reported on Wednesday.

Inflation in India is expected to decelerate to 5.5 percent in 2023 as global commodity prices moderate and slower currency depreciation reduces imported inflation.

The estimates for India’s economic growth in the mid-year assessment remained unchanged from the projections made in the WESP report for 2023 released in January this year. It said that India’s GDP is projected to moderate to 5.8 percent in 2023 as higher interest rates and global economic slowdown weigh on investment and exports.

India’s economic growth is likely to remain “strong” while prospects for other South Asian nations are more challenging.

Hamid Rashid, Chief of the Global Economic Monitoring Branch, Economic Analysis and Policy Division, UN Department of Economic and Social Affairs, remarked that India is a “bright spot” in the world economy.

“Our projection for India hasn’t changed since January and we see many positives, including the inflation has come down significantly…We are pretty confident with our forecast right now for the year,” he said.

India’s inflation is about 5.5 percent while the regional average for South Asia is 11 percent. This means there will be significant room for both fiscal expansion and monetary accommodation and that would support domestic demand.

But risks remain on the external side. If the external financing condition deteriorates further and becomes much tighter, then India’s exports may face some challenges.

The mid-year assessment said that prospects for a robust global economic recovery remain dim amid stubborn inflation, rising interest rates, and heightened uncertainties.

The world economy faces the risk of a prolonged period of low growth as the lingering effects of the pandemic, the ever-worsening impact of climate change, and macroeconomic structural challenges remain unaddressed.

In the US, resilient household spending has prompted an upward revision of the growth forecast to 1.1 percent in 2023. The European Union’s economy, driven by lower gas prices and robust consumer spending, is now projected to grow by  0.9 percent, the report said.

After Beijing lifted the Covid-19-related restrictions in November 2022, China’s growth in 2023 is now forecast at 5.3 percent, as compared to the 4.8 percent projected earlier this year.

“The current global economic outlook presents an immediate challenge to delivering on the Sustainable Development Goals (SDGs),” said UN Under-Secretary-General for Economic and Social Affairs, Li Junhua.

“The global community must urgently address the growing shortages of funding faced by many developing countries, strengthening their capacities to make critical investments in sustainable development and helping them transform their economies to achieve inclusive and sustained long-term growth.”

Global trade remains under pressure because of geopolitical tensions, weakening global demand, and tighter monetary and fiscal policies. The volume of global trade in goods and services is forecast to grow by 2.3 percent in 2023, well below the pre-pandemic trend.

The mid-year report noted that central banks in South Asia continued their interest rate hikes in early 2023 to tackle inflation and stabilize exchange rates.

However, the Reserve Bank of India kept the policy rate unchanged at 6.5 percent in April 2023, after a cumulative increase of 250 basis points since May 2022, it said.