Context:
Recently, the United Nations has released a new report World Economic Situation and Prospects 2023, which stated that the Global Gross Domestic Product (GDP) is likely to drop to 1.9 % in 2023 from 3 % in 2022.
Relevance:
GS III: Indian Economy
Dimensions of the Article:
- Report Findings
- Indian Prospect
- Recommendations
Report Findings:
Inflation
- Average inflation rate was 9% worldwide in 2022, causing budget difficulties for developed and developing countries alike.
Recession
- Current economic downturn hinders recovery from Covid-19 crisis, putting several countries at risk of recession in 2023.
- Job recovery slower in most developing countries in 2022.
- Women’s employment losses during the pandemic have not fully been reversed.
Global Output
- World output growth can return to 2.7% in 2024, dependent on changes in conflict and supply chain disruptions.
Country Projections
- China expected to grow at 4.8% in 2023 and 4.5% in 2024.
- US estimated to have 0.4% economic growth in 2023 and 1.7% in 2024.
- Russian exports rose in 2022 due to increased trade with China, India, and Turkey.
South Asia Outlook
- Economic outlook has greatly worsened due to high food and energy prices, monetary tightening, and fiscal vulnerabilities.
- Average GDP growth expected to decline from 5.6% in 2022 to 4.8% in 2023.
- Bangladesh, Pakistan, and Sri Lanka face challenging economic prospects and sought assistance from IMF in 2022.
Indian Prospect:
Growth Rate
- India’s growth expected to remain strong at 5.8%, lower than the 6.4% estimated for 2022, due to higher interest rates and global slowdown impact on investment and exports.
- Food and energy subsidies prevented a major downfall in India.
- India’s growth projected at 6.7% in 2024, fastest growing among major economies.
Inflation
- Annual inflation estimated at 7.1% in 2022.
- Inflation expected to decrease to 5.5% in 2023 as global commodity prices moderate and slower currency depreciation reduces imported inflation.
Unemployment
- Unemployment rate in 2022 declined to pre-pandemic levels through increased urban and rural employment, indicating strong domestic demand.
- Youth employment still below pre-pandemic levels, especially among young women.
Recommendations:
Calibration of Macroeconomic Policies
- Balance between stimulating output and controlling inflation needed through calibrated macroeconomic policies.
- Effective coordination among central banks and clear policy messages necessary for managing and moderating inflationary expectations.
De-anchoring of Inflation Expectations
- Reform of existing frameworks to benefit, central banks also need a deliberate and comprehensive process to maintain credibility and avoid de-anchoring of inflation expectations.
Reprioritization of Public Expenditures
- Public expenditures need to be reallocated and reprioritized to support vulnerable groups through direct policy interventions.
- This requires strengthening social protection systems and providing support through targeted subsidies, cash transfers, and utility bill discounts.
Scale up SDG Financing
- Urgent need for stronger international commitment to expand emergency financial assistance and scale up SDG financing for:
- Strengthening social protection systems and providing support through targeted subsidies, cash transfers, and utility bill discounts, complemented by reductions in consumption taxes or custom duties.
Source: Down to Earth
