Un Expects India To Again Become The Fastest Growing Economy In The World
UN expects India to again become the fastest growing economy in the world:
United Nations’ Department of Economic and Social Affairs (UNDESA) in one of its reports titled 'World Economic Situation Prospects' (WESP 2018), expects the Indian economy to clock higher GDP growth going forward. The report has observed that despite the slowdown of early 2017 in the Indian GDP, going forward the outlook for the country is largely positive due to the robust public investment and private consumption coupled with the structural reforms initiated by the Government. In fact, the agency predicts that the country’s economy may grow at the rate of 7.2% in 2018 and 7.4% in 2019.
UN Expects India to Again Become the Fastest Growing Economy in The World
The report also observed, “Gross fixed capital formation as a share of GDP has declined from about 40% in 2010 to less than 30% in 2017, amid subdued credit growth, low capacity utilization in some industrial sectors and balance sheet problems in the banking and corporate sectors. In this environment, vigorous public investment in infrastructure has been critical in propping up overall investment growth.”
As far as the monetary policy is concerned, the report advocated some easing while asserting, “Subdued inflation, coupled with a good monsoon season, offers scope for additional monetary easing.” In the foreword of the report, Antonio Guterres, Secretary General of the UN, said that “The World Economic Situation and Prospects 2018 demonstrates that current macroeconomic conditions offer policy-makers greater scope to address some of the deep-rooted issues that continue to hamper progress towards the Sustainable Development Goals”.
The growth rate, as predicted by the report, still falls short of government's expectations of 8%, however, it might enable India to wrest the crown of the fastest growing economy of the world, from China. It is to be noted that India had lost the fastest growing title to China after Prime Minister Narendra Modi, in 2016, demonetized official INR 500 and INR 1000 notes, bringing the economy to a grinding halt. Moreover, soon after demonetization, the Government rolled out Goods & Service Tax (GST), putting further pressure on the growth rates already worsened by making old ‘large denomination currency notes’ illegal. So much so that the GDP slowed to its lowest rate of 5.7% in last 13 quarters and it is only in the July-September quarter than a marginal recovery has been observed in terms of GDP recording growth of 6.3%.
As far as the inflation scenario in India is concerned, the report forecasted it will remain at the level of 4.5% in 2018 and 4.8% in 2019, slightly above the Reserve Bank of India’s (RBI) medium-term target of 4% based on the Consumer Price Index (CPI). In its latest monetary policy review of 6 December, the Indian central bank had raised the range of inflation estimate, for the second half of the fiscal year, to 4.3-4.7%.
It is interesting to note that many prominent research firms have also predicted India’s GDP growth on the very similar lines as that of the UN. Global investment bank Goldman Sachs expects India’s GDP growth to jump to 7.6% in the current financial year and to 8% in FY19 and Moody’s also expects a rebound in India’s growth to 7.5% in 2018-19.