UNCTAD Current Affairs

India, China unlikely to be growth poles for global economy: UNCTAD Report

According to UNCTAD’s recently released Trade and Development Report (TDR) 2017, India and China at their current levels of growth will not serve as “growth polls” for global economy in near future.

TDR is flagship report of the United Nations Conference on Trade and Development (UNCTAD) and is treated as a barometer for assessing the global economic climate.

Key Highlights of report

Global Economy: The world economy in 2017 is picking up but not lifting off.  The global growth is expected to reach 2.6%, well below pre 2008 financial crisis average of 3.2%. Unregulated finance remains at heart of present hyper-globalised world and failure to tame it and address deep-seated inequalities, generated by it threatens efforts to build inclusive economies.

The report calls for serious examination of market power, rent-seeking behaviour and winner-take-most rules of the economic game, which have generated exclusionary outcomes. It outlines global new deal to build more inclusive and caring economies by combining economic recovery with regulatory reforms and redistribution policies with high speed and requisite scale.

India and China: At current levels of growth, both Asian countries are unlikely to serve as “growth polls” for the global economy in near future.

India’s Growth: It is likely to slow down to 6.7% in 2017 from 7% in 2016. India’s growth performance depends on reforms to its banking sector to a large extent, which is burdened with large volumes of stressed and non-performing assets.

The informal sector, which still accounts for at least one-third of India’s GDP and more than four-fifths of employment, was badly affected by the government’s ‘demonetisation’. It may be further affected by rollout of  Goods and Services Tax (GST) from July 2017,

China’s Growth: It has been retained at 6.7%, same as in 2016. Gradual slowdown of China is expected to continue as it moves ahead with rebalancing its economy, towards domestic markets. China’s estimated debt-to-GDP ratio is 249%. China needs to introduce measures to contain its rising debt as domestic demand could be squeezed, with adverse consequences.

Advanced and Developing economies:  The main obstacle to robust recovery in advance countries is fiscal austerity, which remains default macroeconomic option. Capital inflows to developing countries have remain negative, albeit less so than in recent years. Unforeseen events also can knock recovering economies off balance.

UNCTAD

UNCTAD is principal organ of United Nations General Assembly (UNGA) dealing with trade, investment, and development issues. Its goals are to: “maximize the trade, investment and development opportunities of developing countries.” It organizes World Investment Forum. It publishes reports like World Investment Report, Technology and Innovation Report.

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UNCTAD: India among Top FDI Destinations

According to UNCTAD’s World Investment Report 2017, India continues to remain as a favourite destination for FDI even though tax related concerns remain as a deterrent for the foreign investors.

Salient Highlights of the Report

According to the report, the favourite destinations for FDI are the US, China and India. 

As per the report FDI inflows into a developing Asia has reduced by 15% to USD 443 billion in 2016. This decline is the first since 2012. Other than South Asia, the decline has affected the three sub regions of Asia. However, the report has observed that an improved economic outlook in major economies like ASEAN, China and India is expected to boost investor’s confidence thereby increasing the region’s prospects for 2017. In Asian region, major recipients like China, India and Indonesia have renewed their policies to attract FDI. This is expected to increase the FDI inflows in 2017.

In South Asia, FDI inflows increased by 6% to USD 54 billion and outflows declined by 29% to USD 6 billion.

FDI inflows into India remained stagnant at USD 44 billion. India’s outward foreign flows declined by about one third. Cross-border merger and acquisition deals have become important tools in the hands of the foreign multinational enterprises to foray into the rapidly-growing Indian market. The report has also noted that signing of tax treaty with Mauritius would have contributed to decline in instances of round tripping of FDI.

for the first time, China has emerged as the world’s second largest investor of FDI.

BRICS grouping (Brazil, the Russian Federation, India, China and South Asia), which accounts for 22% of the global GDP has received only 11% of the global FDI inflows.

The World Investment Report has been published by the United Nations Conference on Trade and Development (UNCTAD) annually since 1991. The report focuses on trends in foreign direct investment (FDI) worldwide, at the regional and country levels. United Nations Conference on Trade and Development (UNCTAD) was established in 1964.

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