India's economic growth is set to remain strong at 5.8 percent, according to the United Nations, affirming the projections of various international organizations that India will be the fastest-growing major economy.
The UN's World Economic Situation and Prospects report, in its Midyear Update, also forecasts a steady gross domestic product (GDP) growth of 6.7 percent for the following year, driven by resilient domestic demand.
Highlighting the positive aspects of India's economy, Hamid Rashid, Chief of the UN's Global Economic Monitoring Branch, referred to India as the "bright spot" in the global economy. He noted the significant decline in inflation to around 5.5 percent, creating room for fiscal expansion and monetary accommodation to support domestic demand.
Rashid acknowledged external risks, particularly if there is further deterioration in external financing conditions, which could pose challenges for India, particularly in terms of exports. He also emphasized that higher growth rates for India are subject to uncertainty, especially in the external environment, but expressed confidence in the current forecast for the year.
The report observed that financial conditions in emerging economies with good credit ratings have generally remained stable. The projections from other international institutions, such as the International Monetary Fund (IMF) and the World Bank (WB), were slightly lower than the UN's forecast, but still indicating a positive growth trajectory for India.
While the report reduced the overall growth projections for South Asia by 0.1 percent, it highlighted India's inflation deceleration to 5.5 percent, attributing it to moderating global commodity prices and reduced imported inflation due to slower currency appreciation.
Although the report recognized a slight improvement in global economic growth prospects, with a 2.3 percent increase compared to previous projections, it cautioned that challenges remain. Shantanu Mukherjee, Director of the Economic Analysis and Policy Division, warned of prolonged low growth and emphasized that the current growth rate is still below the pre-pandemic average.
Growth Projections of other countries
Globally, the report noted positive growth projections for the United States, the European Union, and China, contributing to the overall improvement in the global picture. China's growth prospects were raised to 5.3 percent, while the US and the European Union saw increases to 1.1 percent and 0.9 percent, respectively.
Capital flows to developing countries experienced a recovery, albeit with volatility, reversing the decline seen in the first half of 2022. The report acknowledged the resilience of global financial markets despite ongoing banking turmoil in the US and Europe, while highlighting the potential for more systematic financial stability risks based on recent developments.
(With inputs from IANS)
