United Nations: India's economy is projected to grow by 7.3 per cent next year and will continue to be the fastest growing economy in the world in 2016 and 2017 amid a volatile global financial conditions that will see diminished trade flows and stagnant investment, according to a UN report released today.
The United Nations World Economic Situation and Prospects (WESP) 2016 report said that India will record a 7.3 per cent economic growth in 2016 and 7.5 per cent in 2017. While the growth is only a marginal improvement from the 7.2 per cent India achieved in 2014-15, the country will remain the fastest growing economy in the world in 2016 and 2017, the report said.
India's rival in South Asia, China will see a slowdown in growth in 2016 to 6.4 per cent from 6.8 per cent it had achieved in 2015.
The growth of the Chinese economy will not improve in 2017, when it will grow by just 6.5 per cent, a percentage point slower than India, which will be the fastest growing economy in the world.
The report further said that the world economy, which stumbled in 2015, will see only a modest improvement in 2016/17 as a number of cyclical and structural headwinds persist.
Global growth is estimated at a mere 2.4 per cent in 2015, marking a downward revision by 0.4 percentage points from the UN forecasts presented six months ago. In 2016, the world economy is projected to grow by 2.9 per cent and by 3.2 per cent in 2017, supported by generally less restrictive fiscal and still accommodative monetary policy stances worldwide, it said.
The report identifies some major headwinds for the global economy including persistent macroeconomic uncertainties, low commodity prices and diminished trade flows, rising volatility in exchange rates and capital flows, stagnant investment and productivity growth and continued disconnect between finance and real sector activities.
It further said that the anticipated timing and pace of normalisation of the US monetary policy stance is expected to reduce policy uncertainties and support a moderate pickup in investments and growth, while preventing excessive volatility in financial markets and ensuring an orderly adjustment in asset prices.
Given the much-anticipated slowdown in China and persistently weak economic performances in other large emerging economies, notably Russia and Brazil, the pivot of global growth is partially shifting again towards developed economies, it said.
“Stronger and more coordinated policy efforts are needed to ensure robust, inclusive and sustainable economic growth, which will be a key determinant for achieving the 2030 Sustainable Development Goals,” Assistant Secretary-General of the United Nations Department of Economic and Social Affairs Lenni Montiel said.
Growth in developed economies will gain some momentum in 2016, surpassing the 2 per cent mark for the first time since 2010, the report said.
The US is projected to grow by 2.6 per cent next year and 2.8 per cent in 2017, a marginal growth from the 2.4 per cent growth clocked in 2015.
Economic growth in developing and transition economies is expected to bottom out and gradually recover, but the external environment will continue to be challenging and growth will remain well below its potential.
The report indicates that the challenges for policymakers around the globe are likely to intensify in the short run in view of the weaknesses in the world economy and difficult trade-offs in the areas of monetary, fiscal and exchange rate policies.
The report underscores that monetary authorities would need to make concerted efforts to reduce uncertainty and financial volatility, striking a delicate balance between their economic growth and financial stability objectives.
“The expected timing and pace of normalisation of the US monetary policy will help reduce some policy uncertainties and provide impetus to revive investment,” Hamid Rashid, Chief of the UN's Global Economic Monitoring Unit added.
Given the massive build-up of private debt in many emerging economies, policymakers would need to fine-tune their policy mix - more active fiscal policies, macro-prudential instruments, targeted labour market policies, among others - amid volatile global financial conditions. The report also warned that the broad slowdown in economic growth in many developing economies could restrain progress in poverty reduction in the near term and derail long-term sustainable development.
To avert such a scenario and stimulate inclusive growth, more effective policy coordination - at the national, regional and global level - is needed.
Further progress in poverty reduction could come from policy interventions that also address inequality, such as investment in education, health and infrastructure, and stronger social safety nets.
