May 17th 2024.
The United Nations announced that the Indian economy is expected to experience a growth rate of 6.9 percent this year, an increase of 0.7 percent from the previous forecast made in January. This reaffirms India's position as the fastest-growing large economy in the world. According to Hamid Rashid, the chief of the UN's Global Economic Monitoring Branch, this positive outlook is driven by a decline in inflation, strong exports, and an influx of foreign investments.
Rashid explained that the decrease in inflation has led to a more favorable fiscal position for India, setting it apart from other countries. Additionally, exports have been performing well, contributing to the improved projection. Rashid also noted that India has become an attractive destination for foreign investments, with many Western companies turning to India as an alternative source.
Another factor that has benefited India is the special import arrangement with Russia for oil, which has lowered the cost of imports. The mid-year edition of the World Economic Situation and Prospects report also highlighted a positive trend in the employment sector, stating that labor market indicators have improved due to strong economic growth and higher participation in the workforce, particularly among women in South Asia.
The projection for India's growth next year remains at 6.6 percent, which was initially forecasted in January. In 2022, India is expected to experience a growth rate of 7.7 percent, thanks to a significant boost after the slowdown caused by the COVID-19 pandemic. The report also revised the projection for the global economy, estimating a growth rate of 2.7 percent, an increase of 0.3 percent from the previous forecast in January.
Although the report presents an overall positive outlook, it also issues a cautionary note, stating that the future remains uncertain due to factors such as high interest rates, debt issues, and escalating geopolitical risks. Despite these challenges, the report acknowledges that most major economies have been successful in reducing inflation without causing unemployment or a recession.
Developing economies continue to outpace the developed economies, with a growth rate of 4.1 percent compared to 1.6 percent for the latter. However, the growth among developing countries is uneven, with some countries like India, Indonesia, and Mexico experiencing strong domestic and external demand, while others, particularly in Africa, Latin America, and the Caribbean, are facing obstacles such as political instability, high borrowing costs, and currency fluctuations.
China's economy is projected to grow by 4.8 percent this year, making it the second-fastest-growing large economy. The United States is expected to experience a growth rate of 2.3 percent, despite the aggressive monetary tightening in recent years. Looking ahead, the report highlights the impact of rapid technological advancements, including machine learning and artificial intelligence, on the global economy. While these advancements have the potential to boost productivity and knowledge, they also pose risks such as exacerbating technological divides and reshaping labor markets.
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