Tatsat Chronicle Magazine

Indian Economy To Grow By 6.7% In 2024, Says World Economic Situation And Prospects Report

May 17, 2023
Economic Survey_Economy

Indian economy is expected to grow by 6.7 per cent in the calendar year 2024 supported by resilient domestic demand, a report brought out by the United Nations says.

The World Economic Situation and Prospects as of mid-2023 released by the UN said, Growth in India is expected to remain strong at 5.8 per cent, albeit slightly lower than the estimated 6.4 per cent in 2022, as higher interest rates and a global slowdown weigh on investment and exports.

It said, higher interest rates and weaker external demand will continue to weigh on investment and exports this year for the country. Inflation in India is expected to decelerate to 5.5 per cent in 2023 as global commodity prices moderate and slower currency depreciation reduces imported inflation.

The report said, in South Asia, the economic outlook has significantly deteriorated due to high food and energy prices, monetary tightening and fiscal vulnerabilities. Average GDP growth is projected to moderate from 5.6 per cent in 2022 to 4.8 per cent in 2023. The prospects are more challenging for other economies in the region. Bangladesh, Pakistan and Sri Lanka sought financial assistance from the International Monetary Fund (IMF) in 2022.

The World Economic Situation and Prospects 2023 is a report produced by the United Nations Department of Economic and Social Affairs (UN DESA), in partnership with the United Nations Conference on Trade and Development (UNCTAD) and the five United Nations regional commissions: Economic Commission for Africa (UNECA), Economic Commission for Europe (UNECE), Economic Commission for Latin America and the Caribbean (UNECLAC), Economic and Social Commission for Asia and the Pacific (UNESCAP) and Economic and Social Commission for Western Asia (UNESCWA). The United Nations World Tourism Organization (UNWTO) also contributed to the report.

It said in Western Asia, oil-producing countries have emerged from the economic slump, benefitting from high prices and rising oil output as well as the recovery of the tourism sector. Recovery in non-oil-producing countries, by contrast, has remained weak given tightening access to international finance and severe fiscal constraints. Average growth is projected to slow from an estimated 6.4 per cent in 2022 to 3.5 per cent in 2023, given worsening external conditions. In Africa, economic growth is projected to remain subdued with a volatile and uncertain global environment compounding domestic challenges. The region has been hit by multiple shocks, including weaker demand from key trading partners (especially China and Europe), a sharp increase in energy and food prices, rapidly rising borrowing costs and adverse weather events. As debt-servicing burdens mount, a growing number of governments are seeking bilateral and multilateral support. Economic growth is projected to slow from an estimated 4.1 per cent in 2022 to 3.8 per cent in 2023.

The report said that a series of severe and mutually reinforcing shocks struck the world economy in 2022 as it approached the midpoint for achieving the 2030 Sustainable Development Goals (SDGs). With the impacts of the COVID‑19 pandemic still reverberating worldwide, the war in Ukraine ignited a new crisis, disrupting food and energy markets, and worsening food insecurity and malnutrition in many developing countries.

High inflation unleashed an erosion of real incomes and a global cost-of-living crisis that has pushed millions into poverty and economic hardship. At the same time, the climate crisis continued to impose a heavy toll, with heat waves, wildfires, floods and hurricanes inflicting massive economic damages and generating humanitarian crises in many countries. All these shocks will weigh heavily on the world economy in 2023.

Persistently high inflation, which averaged about 9 per cent in 2022, has prompted aggressive monetary tightening in many developed and developing countries. Rapid interest rate hikes, particularly by the Federal Reserve in the United States of America, have had global spillover effects, triggering capital outflows and currency depreciations in developing countries, increasing balance of payment pressures and exacerbating debt sustainability risks.

Financing conditions have tightened sharply amid high levels of private and public debt, pushing up debt-servicing costs, constraining fiscal space and increasing sovereign credit risks. Rising interest rates and diminishing purchasing power have weakened consumer confidence and investor sentiment, further clouding near-term growth prospects for the world economy. Global trade has softened due to tapering demand for consumer goods, the protracted war in Ukraine and continued supply chain challenges.

Against this backdrop, world output growth is projected to decelerate from an estimated 3 per cent in 2022 to only 1.9 per cent in 2023, marking one of the lowest growth rates in recent decades. Global growth is forecast to moderately pick up to 2.7 per cent in 2024, if, as expected, some macroeconomic headwinds begin to subside next year. Inflationary pressures are projected to gradually abate amid weakening aggregate demand in the global economy. This should allow the Federal Reserve and other major central banks to slow the pace of monetary tightening and, eventually, shift to a more accommodative monetary policy stance. The near-term economic outlook remains highly uncertain, however, as myriad economic, financial, geopolitical and environmental risks persist.

Girja Shankar Kaura

The writer is a Delhi-based freelance journalist, who has reported and written on a wide range of subjects in an extensive career.