India's economic recovery on 'solid path' to grow 6.5 pc

The flagship United Nations World Economic Situation and Prospects (WESP) 2022 report, launched Thursday, said that India's GDP is forecast to grow at 6.5 percent in the fiscal year 2022 amid a fast-paced vaccination drive though factors like coal shortages and high oil prices could put the brakes on economic activity in the near term

The report projected the growth to further slow down to 5.9 percent in the financial year 2023.

On a calendar year basis, India's GDP is projected to grow by 6.7 percent in 2022 after a 9 percent increase in the calendar year 2021, as base effects wane.

GDP growth for the country is projected to slow down to 6.1 percent in the calendar year 2023, the report said.

"India's economic recovery is on a solid path, amid rapid vaccination progress, less stringent social restrictions, and still supportive fiscal and monetary stances," the report said.

The report noted that for India, robust export growth and public investments support economic activity, while high oil prices and coal shortages could hinder economic activity in the near term.

"It will remain crucial to encourage private investment to support inclusive growth beyond the recovery," it added.

It added that while still vulnerable, India is better placed to pass through financial upheavals compared to its situation during the "taper tantrum" episode after the 2008-2009 global financial crisis.

This is due to a stronger external position and measures to minimise risks to bank balance sheets. In the medium-term, scarring effects from higher public and private debt or permanent impacts on labour markets could reduce potential growth and prospects for poverty reduction.

In India, inflation is expected to decelerate throughout 2022, continuing a trend observed since the second half of 2021 when relatively restrained food prices compensated for higher oil prices.

A sudden and renewed rise in food inflation, however, due to unpredictable weather, broader supply disruptions and higher agricultural prices, could undermine food security, reduce real incomes and increase hunger across the region.

The report said that the global economic recovery is facing significant headwinds amid new waves of COVID-19 infections, persistent labour market challenges, lingering supply-chain challenges, and rising inflationary pressures.

After expanding by 5.5 percent in 2021, the global output is projected to grow by only 4.0 percent in 2022 and 3.5 percent in 2023.

"In this fragile and uneven period of global recovery, the World Economic Situation and Prospects 2022 calls for better targeted and coordinated policy and financial measures at the national and international levels," UN Secretary-General Antonio Guterres said.

"The time is now to close the inequality gaps within and among countries. If we work in solidarity - as one human family - we can make 2022 a true year of recovery for people and economies alike," he said.

With the highly transmissible Omicron variant of COVID-19 unleashing new waves of infections, the human and economic toll of the pandemic are projected to increase again.

"Without a coordinated and sustained global approach to contain COVID-19 that includes universal access to vaccines, the pandemic will continue to pose the greatest risk to an inclusive and sustainable recovery of the world economy," Under-Secretary-General of the United Nations Department of Economic and Social Affairs Liu Zhenmin said.

In India, a deadly wave of infection with the Delta variant stole 240,000 lives between April and June 2021 and disrupted economic recovery.

"Similar episodes could take place in the near term," the report said.

It also noted the "important step" taken by India to commit to 50 percent of its energy mix coming from renewable sources by 2030 and to reaching net-zero emissions by 2070.