Arul Louis (IANS) | 17 May, 2024
Indian economy's growth rate projection for this year has been raised
by 0.7 per cent to 6.9 per cent from the forecast made in January by
the UN and it retains its position as the world's fastest-growing large
economy.
The better outlook is fueled by lower inflation, robust
exports, and increased foreign investments, Hamid Rashid, the chief of
the UN’s Global Economic Monitoring Branch, said on Thursday.
"The
drivers (of higher projection) are very simple: inflation has come down
significantly, and that means the fiscal position is not as constrained
as in other countries," he said at the release of the mid-year edition
of the World Economic Situation and Prospects (WESP) report.
Exports,
which is another element in the improved projection, have been "pretty
robust" and India is also benefiting from more investments coming in
from other Western sources while the flow to China is coming down,
Rashid said.
"India has become an alternative investment source or destination for many Western companies," he added.
Another
factor benefiting India, he said, is the special import arrangement
India has with Russia for oil that is lowering its cost, he said.
The
WESP report also gave a positive picture of the employment situation,
saying: "In India, labour market indicators have also improved amid
robust growth and higher labour participation."
It said that the women’s labour force participation has increased particularly in South Asia.
India’s growth projection for next year remains at 6.6 per cent, which was made in January.
Last
year, the WESP report said, India's economy grew by 7.5 per cent and in
2022 by 7.7 per cent when it received a big short-term boost coming out
of the drastic Covid slowdown.
The report also revised the
projection for the world economy this year to 2.7 per cent, an increase
of 0.3 per cent from January.
"Most major economies have managed
to bring down inflation without increasing unemployment and triggering a
recession," the report said adding a cautionary note, "However, the
outlook is only cautiously optimistic as higher-for-longer interest
rates, debt difficulties, and escalating geopolitical risks will
continue to challenge stable and sustained economic growth".
The
developing economies on the whole are growing at a faster clip --
clocking 4.1 per cent -- than the developed economies which are expected
to record only a 1.6 per cent growth rate this year.
However, the growth among developing countries is uneven, the WESP report stated.
While
large developing economies like India, Indonesia and Mexico are
benefiting from strong domestic and external demand, many African, Latin
American and Caribbean economies are on a "low-growth trajectory"
because of "lingering political instability", higher borrowing costs and
exchange rate fluctuations, it said.
China's economy is projected to grow by 4.8 per cent this year, making it the second fastest-growing large economy.
The US economy is projected to grow by 2.3 per cent this year.
"Despite
the most aggressive monetary tightening in decades, a scenario of hard
landing of the United States economy has receded," the report said.
Looking ahead, the WESP saw risks and opportunities in rapid technology changes.
"The
breakneck pace of technological change -- including in machine learning
and artificial intelligence -- presents new opportunities and risks to
the global economy, promising to boost productivity and advance
knowledge on the one hand, while exacerbating technological divides and
reshaping labour markets on the other," the report said.
(Arul Louis can be contacted at arul.l@ians.in and followed at @arulouis)