United Nations, April 12
India’s economic growth is projected to decelerate to 6 per cent in 2023 from 6.6 per cent in 2022, according to the United Nations.
The UN Trade and Development Conference (UNCTAD) in its latest Trade and Development Report Update released Wednesday expects global growth in 2023 to drop to 2.1%, compared to the 2.2% projected in September 2022, assuming the financial fallout from higher interest rates is contained to the bank runs and bailouts of the first quarter.
It warned that developing countries are facing years of difficulty as the global economy slows down amid heightened financial turbulence. Annual growth across large parts of the global economy will fall below the performance registered before the pandemic and well below the decade of strong growth before the global financial crisis.
The report said India grew 6.6 per cent in 2022, ceding the pole position among G20 countries in 2022 to oil-rich Saudi Arabia, which grew at 8.6 per cent. Meanwhile, as current government spending has been weakening, but export orders remain on the rise, India’s GDP growth is projected to decelerate to 6.0 per cent in 2023.
For India, it said the positive effect of high public and private investment and consumption as well as rising exports was partly offset by higher energy import bills, which deepened the current account deficit and ate up reserves.
“The Reserve Bank of India started tightening its policy stance during the spring of 2022 to limit damage caused by foreign capital outflows, a weakening currency and inflation risks. Higher financing cost slightly dented buoyant economic activity, and over-leveraging in the corporate sector may become a factor of financial instability,” the report said.
In view of financing its growth ambitions, the Indian Government has committed to massive infrastructure investment. In 2020 and 2021 and in the energy sector alone, funds amounting to USD 160 billion had been committed to fossil and non-fossil projects alike, the report noted.
South Asia registered a growth of 5.7 per cent in 2022 but the stark rise in already high poverty rates has not abated yet. UNCTAD expects the region to expand at a still fast pace of 5.1 per cent in 2023, “driven by the growth of its largest economy, India.”
Strong dependence on extra-regional fossil imports will keep the region vulnerable to inflationary pressures, which may trigger further monetary tightening while public spending may be curtailed by budgetary pressures, it added.
The report further said that highly indebted South Asian countries, such as Sri Lanka or Bangladesh, will keep facing pressures from external creditors to cut public spending and cancel social, productive and climate adaptation investments.
