UN lowers India GDP growth forecast for 2017 to 7.3%, cautions on bad loans

The UN has lowered India GDP growth forecast to 7.3% for 2017 but predicted a higher 7.9% for 2018. Photo: Reuters

The UN has lowered India GDP growth forecast to 7.3% for 2017 but predicted a higher 7.9% for 2018. Photo: Reuters

In News:

  • The United Nations (UN) has revised downward India’s GDP growth forecast for 2017 but predicted an increased 7.9% GDP growth next year
  • It cautioned that stressed balance sheets in the banking sector due to bad loans will prevent strong investment rebound in the near term.

Report:

  • The UN World Economic Situation and Prospects as of mid- 2017 report, said India is projected to achieve a 7.3% growth in 2017, a downward revision from the 7.7% forecast for the year made when the report was launched in January
  • Despite temporary disruptions from the demonetisation policy, economic conditions in India remain robust, underpinned by sound fiscal and monetary policies and the implementation of key domestic reforms, 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
  • The report said world gross product is expected to expand by 2.7% in 2017 and 2.9% in 2018, unchanged from UN forecasts released in January this year
  • The report identifies a tentative recovery in world industrial production, along with reviving global trade, driven primarily by rising import demand from East Asia

Suggested reforms:

  • The report points to a combination of short-term policies to support consumption among the most deprived and longer-term policies such as improving access to healthcare and education and investment in rural infrastructure
  • The report states that inflation dynamics in developed economies have reached a turning point, and risks of prolonged deflation have largely dissipated
  • By contrast, inflationary pressures have eased in many large emerging markets, allowing interest rates to come down
  • Looking ahead, the report advocates for renewed global commitments to deeper international policy coordination in key areas including:
    • Aligning the multilateral trading system with the 2030 Agenda for Sustainable Development;
    • Expanding official development aid;
    • Supporting climate finance and clean technology transfer; and
    • Addressing the challenges posed by large movements of refugees and migrant
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