India’s economic growth to decline to 5.7% in 2022: UNCTAD report

India’s economic growth to decline to 5.7% in 2022: According to a major UN agency, India’s economic growth will fall to 5.7 percent this year from 8.2 percent in 2021, owing to rising financing costs and lower public expenditures. United Nations Conference on Trade and Development Report predicts that India’s GDP would continue to slow down, reaching 4.7 percent growth in 2023.

India’s economic growth to decline to 5.7% in 2022: Key Points

• India had the strongest growth among the G20 nations in 2021, at 8.2 percent. According to the report, growth slowed as supply chain disruptions subsided, domestic demand increased, and the surplus on the current account changed into a deficit.
• Government’s Production-Linked Incentive Scheme is encouraging corporate investment, but rising import costs for fossil fuels are widening the trade gap and reducing the ability of foreign exchange reserves to pay imports.
• According to UNCTAD, the South Asian region will grow at a rate of 4.9 percent in 2022 as a result of rising inflation brought on by high energy prices, which will aggravate balance of payments problems and force several governments, including Bangladesh and Sri Lanka, to cut back on energy consumption.
• Further, the region remains vulnerable to future outbreaks due to the slow and limited progress in easing vaccine-related intellectual property (IP) rights. According to UNCTAD, the region’s growth rate would slightly slow down to 4.1 percent in 2023.
• In the wake of Russia’s invasion of Ukraine, a number of events has increased pressure on oil markets, including the US ban on oil imports from Russia and the ban on shipping insurance for Russian oil shipments.
• Imports have a significant impact on domestic prices when commodity prices are higher. According to recent studies over the last five decades, an increase in oil prices of 50% is correlated with an increase in inflation of between 3.5 and 4.4 percentage points, with a lag of around two years.
• These data imply that increasing commodity (oil) prices have contributed significantly to inflation in developing nations as well as advanced economies in 2021–2022.
• It also noted that certain emerging economies saw bigger public budget deficits as a result of increased spending on social protection and decreased tax collection in the wake of the pandemic.

UNCTAD

• An intergovernmental body called the United Nations Conference on Trade and Development (UNCTAD) was founded in 1964 with the goal of advancing the interests of developing countries in international trade.
• UNCTAD’s main goal is to design policies for all development-related issues, including trade, aid, transportation, finance, and technology.
• Geneva, Switzerland serves as the headquarters of UNCTAD, which has 195 members.