The United Nations has revised downward India’s economic growth forecast for 2017 but predicted an increased 7.9 per cent GDP growth next year as it cautioned that stressed balance sheets in the banking sectors will prevent strong investment rebound in the near term.
The UN World Economic Situation and Prospects as of mid- 2017 report, launched here today, said India is projected to achieve a 7.3 per cent growth in 2017, a downward revision from the 7.7 per cent forecast for the year made when the report was launched in January.
The revised report, however, projected that India will achieve an impressive 7.9 per cent GDP growth in 2018, revising upwards its January estimates when it had said India’s growth will be 7.6 per cent next year.
The report warned that stressed balance sheets in the country’s banking sector, which has emerged as a cause of concern for the Narendra Modi government, will have an adverse effect on investment rebound in the country.
“Despite temporary disruptions from the demonetization policy, economic conditions in India remain robust, underpinned by sound fiscal and monetary policies and the implementation of key domestic reforms.
Yet, stressed balance sheets in the banking and corporate sectors will prevent a strong investment rebound in the near term,” the report said.
It noted that current accounts deficits have narrowed “visibly” in India, Brazil and South Africa, and some countries have undergone significant corporate deleveraging, particularly Russia.
Despite India’s growth being revised downward, it remains the fastest growing large developing economy, way ahead of China which is projected to grow at 6.5 per cent in 2017 and 2018.
The report said world gross product is expected to expand by 2.7 per cent in 2017 and 2.9 per cent in 2018, unchanged from UN forecasts released in January this year. This marks a notable acceleration compared to just 2.3 per cent in 2016.
The report identifies a tentative recovery in world industrial production, along with reviving global trade, driven primarily by rising import demand from East Asia.
Assistant Secretary-General for Economic Development in the UN Department of Economic and Social Affairs lenni Montiel underscored the “need to reinvigorate global commitments to international policy coordination to achieve a balanced and sustained revival of global growth, ensuring that no regions are left behind.”
According to the report, underpinning global economic recovery is firmer growth in many developed economies and economies in transition, with East and South Asia remaining the world’s most dynamic regions, benefiting from robust domestic demand and supportive macroeconomic policies.