India a 'bright spot' in world economy right now

United Nations: India is a "bright spot" in the world economy currently and is on a "strong footing", projected to grow at 6.7 per cent next year, a very high growth rate relative to other G20 member countries, a top UN economist said. These remarks were made by the Chief of the Global Economic Monitoring Branch, Economic Analysis and Policy Division, UN-Department of Economic and Social Affairs Hamid Rashid. "I think India is a bright spot in the world economy right now," Rashid said at a press conference here Wednesday at the launch of the World Economic Situation and Prospects 2023 report.

The flagship report said that India's GDP is projected to moderate to 5.8 per cent in 2023 as higher interest rates and global economic slowdown weigh on investment and exports. India's economic growth is expected to remain "strong" even as prospects for other South Asian nations "are more challenging." India is projected to grow at 6.7 per cent in 2024, the fastest-growing major economy in the world.

Rashid said, "we believe the Indian economy is on a strong footing given the strong domestic demand in the near term." Noting that India's economic growth is expected to pick up in 2024 to 6.7 per cent, he said this is "very high growth relative to other G20 member countries.

The Group of Twenty (G20) comprises 19 countries (Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Republic of Korea, Mexico, Russia, Saudi Arabia, South Africa, Türkiye, United Kingdom and United States) and the European Union "This is a sustainable growth rate for India. India also has a significant number of people living in poverty. So, this would be a great boost. If India can sustain this growth rate in the near term, that would be good for the Sustainable Development Goals, good for poverty reduction globally," Rashid said.

Responding to a question on the Indian economy, Rashid, who is the lead author of the report, attributed three factors to India's current economic strength. He said India's unemployment rate has come down significantly in the last four years to 6.4 per cent and is lower than what it was around 2017. "That means the domestic demand has been pretty strong," he said. India's inflation pressure also has "eased quite significantly" and it is expected to be about 5.5 per cent this year and 5 per cent in 2024. Rashid said this means that the country's central bank would not have to aggressively go for monetary tightening. The third factor benefitting India is that its import bills have been lower, "especially energy import cost has been lower than in the previous years. That has also helped India's growth prospect in 2022 and 2023," he said.

Outlining "downside risks" for India's growth prospects in the near term, Rashid said higher interest rates have a spillover effect. "India's debt servicing cost has exceeded 20 per cent of the budget and that is a significantly high debt servicing cost and that would probably have some drag on the growth prospects."

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