India’s economy is expected to grow by 6.7 per cent in the calendar year 2024, on the back of strong domestic demand, according to a UN report.
India’s economy, the largest in the South Asian region, is expected to expand by 5.8 per cent in 2023 and 6.7 per cent in 2024 (calendar year basis).
However, higher interest rates and weaker external demand will continue to weigh on investment and exports in 2023, it said.
Inflation in India is expected to decelerate to 5.5 per cent in 2023, as global commodity prices see a correction and the rupee sees slower depreciation, reducing the costs of imports.
The regional average inflation for South Asia is 11 per cent.
The estimates for India’s economic growth, at a projected 5.8 per cent, in the mid-year assessment remained unchanged from the projections made in the World Economic Situation and Prospects 2023 report launched in January 2023.
India’s economic growth is expected to remain ‘strong’ even as prospects for other South Asian nations dwindle and it is to remain the fastest-growing economy in the world.
Chief of the Global Economic Monitoring Branch, Economic Analysis and Policy Division, UN Department of Economic and Social Affairs, Hamid Rashid had said at a press conference that India is a ‘bright spot’ in the world economy.
There will be significant room for both fiscal expansion and monetary accommodation and that would support domestic demand, added Mr Rashid.
The only challenges faced by India going forward will be from external factors. If external financing t becomes much tighter, then it could hit exports.
Global economic recovery remains a far-fetched sight at the moment with stubborn inflation, rising interest rates and heightened uncertainties, in the wake of a once-in-a-lifetime pandemic.
Ever-worsening climate change and macroeconomic structural challenges and rising income inequality remain unaddressed challenges and India’s economy is certainly not immune to changing global forces.
According to the report, the world economy is now projected to grow by 2.3 per cent in 2023 ( 0.4 percentage points from the January forecast) and 2.5 per cent in 2024 (-0.2 percentage points), slightly higher than forecasted.
The US is gorwing at 1.1 per cent in 2023 and the EU is projected to grow by 0.9 per cent, the report said.
China’s growth this year is now forecast at 5.3 per cent, as compared to the 4.8 per cent projected earlier this year, as a result of COVID-19-related restrictions being lifted.
‘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,’ the report observed.
Global trade remains under pressure due to 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 per cent in 2023, well below the pre-pandemic trend.
While central banks in South Asia continued their interest rate hikes in early 2023 to tackle inflation and stabilize exchange rates, the Reserve Bank of India kept the policy rate unchanged at 6.5 per cent in April 2023, after a cumulative increase of 250 basis points since May 2022, it added.
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