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Indian economy recovery on a ‘solid path’: UN report

Indian economy recovery on a ‘solid path’: UN report

UN in its report credited the vaccination drive, less stringent social restrictions, and supportive monetary stances as reasons for the growth. 

Business Today Desk
Business Today Desk
  • Updated Jan 14, 2022 11:50 AM IST
Indian economy recovery on a ‘solid path’: UN reportIndia’s economic recovery is on a solid path, says UN

United Nations’ ‘World Economic Situation and Prospects 2022’ report stated that India’s economic recovery is on a “solid path”. It further expects India’s GDP to expand by 6.7 per cent in 2022. UN in its report credited the vaccination drive, less stringent social restrictions, and supportive monetary stances as reasons for the growth. 

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“India’s economic recovery is on a solid path, amid rapid vaccination progress, less stringent social restrictions and still supportive fiscal and monetary stances. GDP is projected to expand by 6.7 per cent in 2022 (figure III.17) after a 9 per cent expansion in 2021, as base effects wane. Robust export growth and public investments underpin economic activity, but high oil prices and coal shortages could put the brakes on economic activity in the near term,” it stated. 

Encouraging private investment will remain crucial, the report stated. It also called India’s commitment to renewable sources and net-zero emissions by 2070 an “important step”. 

The report, however, did have a line of warning for India.

“In India, a deadly wave of infection with the Delta variant stole 240,000 lives between April and June and disrupted economic recovery. Similar episodes could take place in the near term,” the UN report cautioned.

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“Accelerated global monetary tightening could increase volatility, trigger capital outflows and disrupt credit growth, especially in countries with elevated debt, large financing needs and high levels of foreign-currency-denominated debt. Significant financial distress could emerge as highly leveraged firms face greater refinancing costs, particularly in sectors hit harder by lockdowns, even more so if the removal of forbearance measures uncovers a large deterioration in balance sheets,” it said.

The UN report predicted inflation to decelerate throughout 2022, “continuing a trend observed since the second half of 2021 when relatively restrained food prices compensated for higher oil prices”. It warned that sudden and renewed rise in food inflation due to unpredictable weather, broader supply disruptions and higher agricultural prices, could undermine food security, reduce real incomes and increase hunger across the region. 

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COVID-19 resulted in many central banks in developing countries introducing asset purchase programmes. “During 2020, 27 central banks – 10 in Africa, 9 in Asia and 8 in Latin America and the Caribbean – embarked on APPs. While these programmes have been broadly modelled after those in developed economies, they mainly aimed to boost market confidence and reduce market dysfunctionality and have been much smaller in scale and shorter in duration. By the second quarter of 2021, the Reserve Bank of India was the only major developing country central bank continuing significant asset purchases,” it added.

 

Published on: Jan 14, 2022 11:50 AM IST
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