India to grow 5.7% in 2022, slow down to 4.7% in 2023: UNCTAD

Amidst global slowdown ringing alarm bells across the developing world, Indian economy may grow 5.7% in 2022 and the growth will slow down by one percentage point to 4.7% in 2023, estimates the United Nations Conference on Trade and Development (UNCTAD). The UN agency attributes the decline in growth to the impact of weakening global economy and the fiscal pressures that may prevent the government from ramping up its overall capital expenditure beyond a point. The global economy is estimated to grow 2.5 % in 2022.

“India’s economic activity is being hampered by higher financing costs and weaker public expenditures, resulting in a deceleration in GDP growth to 5.7% in 2022. Going forward, the government has announced plans to increase capital expenditure, especially in the rail and road sector, but in a weakening global economy, policymakers will be under pressure to reduce fiscal imbalances, and this may lead to falling expenditures elsewhere,” UNCATD’s Annual Trade and Development Report 2022 states.

UNCTAD called India’s 8.2% growth in 2021 as the strongest among G20 countries. “As supply chain disruptions eased, rising domestic demand turned the current account surplus into a deficit, and growth decelerated. The Production-Linked Incentive Scheme introduced by the government is incentivising corporate investment, but rising import bills for fossil energy are deepening the trade deficit and eroding the import coverage capacity of foreign exchange reserves,” the report observed.

On the growth of world economy, the report says it is expected to grow 2.5% in 2022, more than one percentage points below the rate projected in last year’s report. It says the prospects of global economic growth appear to be worsening and predicted a 2.2% growth in world economy in 2023. The report also expressed concerns over ‘an unduly rapid tightening of monetary policy in advanced economies in combination with inadequate multilateral support’ as it could turn a slowdown into recession, triggering vicious economic circles in the developing world with the damage more lasting than after the global financial crisis or Covid shock.

For South Asia, UNCTAD expects a weakening economic expansion of 4.9% in 2022, as inflation increases on the back of high energy and food prices, exacerbating balance of payment constraints and forcing several governments to restrict energy consumption. For 2023, UNCTAD expects the region’s growth rate to decelerate further to 4.1%.