Global Growth Current Affairs
According to UN World Economic Situation and Prospects (WESP), India’s economy is projected to grow 7.6% in fiscal year 2018-19, making it fastest growing economy in the world. GDP growth in India is expected 7.5 and 7.6% in fiscal years 2017-18 and 2018-19 respectively.
Key Highlights of report
World economy: It is projected to reach 3.2% both in 2018 and 2019, an upward revision by 0.2 and 0.1%, respectively. Global GDP is expected to expand, reflecting strong growth in developed countries and broadly favourable investment conditions. However rising trade tensions, heightened uncertainty over monetary policy, increasing debt levels and greater geopolitical tensions can potentially thwart growth progress.
World trade growth: It also has accelerated, reflecting widespread increase in global demand. Many commodity-exporting countries will also benefit from the higher level of energy and metal prices. The modest rise in global commodity prices will exert some upward pressure on inflation in many countries. But the inflationary pressures remain contained across most developed and developing regions.
India: GDP growth is expected 7.5 and 7.6% in fiscal years 2017-18 and 2018-19 respectively. This is a substantial recovery from 6.7% growth India registered in fiscal year 2017. Growth in India is gaining momentum, underpinned by robust private consumption, slightly more supportive fiscal stance and benefits from past reforms. Though capital spending in India has shown signs of revival, more widespread and sustained recovery in private investment remains crucial challenge in India.
China: It is projected to gradually moderate from 6.9% in 2017 to 6.5% in 2018 and 6.3% in 2019. Its growth is expected to remain solid, supported by robust consumer spending and supportive fiscal policies followed by ongoing structural reforms.
South Asia: GDP growth in region is expected to strengthen to 6.6% in 2018 and 6.8% in 2019, following an expansion of 6% in 2017. It remains favourable, amid robust domestic demand, strong infrastructure investment and moderately accommodative monetary policies. Moreover, regional inflation is anticipated to remain stable and at relatively low levels.
UN World Economic Situation and Prospects (WESP)
The report is joint product of UN Department of Economic and Social Affairs (UN/DESA), UN Conference on Trade and Development (UNCTAD) and five United Nations regional commissions.
The International Monetary Fund (IMF) in its latest World Economic Outlook (WEO) has projected India to grow at 7.4% in 2018 and 7.8% in 2019. It also held that India will again emerge as world’s fastest-growing major economy at least for the next two years (2019 and 2020).
India’s growth: Over the medium term, India’s growth will gradually rise with continued implementation of structural reforms that will raise productivity and incentivise private investment. It will be driven by recovery from transitory effects of currency exchange initiative and implementation of national GST tax and supported by strong private consumption growth. India’s progress on structural reforms in recent past, including through implementation of GST will help reduce internal barriers to trade, increase efficiency and improve tax compliance.
China’s Growth: Its expansion will slow to 6.6% and 6.4% for 2018 and 2019, respectively, against 6.9% in 2017. China, with 6.9% growth, jumped marginally ahead of India in 2017.
Global Growth: It is seen stable at 3.9% over current and next calendar years, almost unchanged from 3.6% in 2018, despite a looming trade war between the US and China. The risks from inward-looking policies of some countries to trade prospects and trade war may not spiral out of control, plunging world into broader crisis
Challenges to India’s growth: Though India’s medium-term growth outlook for India is strong, important challenge to it is to enhance inclusiveness. Moreover, India’s high public debt and recent failure to achieve budget’s deficit target, calls for continued fiscal consolidation into medium term to further strengthen fiscal policy credibility. Moreover, it should also ease labour market rigidities, reduce infrastructure bottlenecks, and improve educational outcomes for lifting constraints on job creation and ensuring that demographic dividend is not wasted.