Indian economy recovering on ‘solid track’ says UN report

The United Nations’ World Economic Situation and Prospects 2022 report says India’s economic recovery is on a “strong track”. It further expects India’s GDP to grow by 6.7% in 2022. In its report, the UN attributed the vaccination campaign, less stringent social restrictions and favorable monetary positions as reasons. of growth.

“India’s economic recovery is on a solid track, amid rapid progress in immunization, less stringent social restrictions and still supportive fiscal and monetary positions. GDP is projected to grow by 6.7% in 2022 (Figure III.17) after expanding by 9% in 2021, as base effects fade. Robust export growth and public investment are supporting economic activity, but high oil prices and coal shortages could dampen economic activity in the near term,” he said.

Encouraging private investment will remain crucial, the report says. He also called India’s commitment to renewable sources and net zero emissions by 2070 a “significant milestone”.

The report, however, contained a warning line for India.

“In India, a deadly wave of Delta variant infection claimed 240,000 lives between April and June and disrupted economic recovery. Similar episodes could occur in the short term,” the UN report warned.

“Accelerated global monetary tightening could increase volatility, trigger capital outflows and disrupt credit growth, particularly in countries with high debt, large financing needs and high levels of foreign currency-denominated debt. Significant financial difficulties could arise as highly indebted companies face higher refinancing costs, particularly in sectors hardest hit by the lockdowns, all the more so if the removal of forbearance measures reveals a strong deteriorating balance sheets,” he said.

The UN report predicted a deceleration in inflation throughout 2022, “continuing a trend seen since the second half of 2021, when relatively restrained food prices offset higher oil prices.” He warned that a sudden and renewed increase in food inflation due to unpredictable weather conditions, wider supply disruptions and higher agricultural prices, could undermine food security, reduce real incomes and increase hunger in the region.

COVID-19 has prompted many central banks in developing countries to introduce asset purchase programs. “In 2020, 27 central banks – 10 in Africa, 9 in Asia and 8 in Latin America and the Caribbean – have embarked on PPAs. Although these programs were largely modeled on those of developed economies, they were primarily aimed at building market confidence and reducing market dysfunction and were much smaller and shorter in duration. In the second quarter of 2021, the Reserve Bank of India was the only major central bank in a developing country to pursue large asset purchases,” he added.

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