The United Nation's (UN) Department of Economic and Social Affairs has scaled down India's GDP growth projections from 6.7% to 6.4% for 2022-23 in its just released mid-year update.
The ongoing conflict in Ukraine, higher commodity prices and potential negative spillover effects from monetary tightening in the United States have deteriorated the growth outlook for entire South Asia, including the region's largest economy, India, the UN World Economic Situation and Prospects as of mid-2022 forecast says.
"The South Asian regional economic output is projected to expand by 5.5 per cent in 2022, which is 0.4 percentage points lower than our forecast released in January. India, the largest economy in the region, is expected to grow by 6.4 per cent in 2022, well below the 8.8 per cent growth in 2021, as higher inflationary pressures and uneven recovery of the labour market will curb private consumption and investment," the report says. The estimates for the region and India are on a fiscal year (2022-23) basis.
For the next fiscal year 2023-24, the forecast remains more or less the same, with the mid-year review estimating a 6% GDP growth for India, as against an estimated 6.1% early this year.
The report also pointed out that higher prices and shortages of farming inputs including fertilisers are likely to persist in the region, negatively impacting the agricultural sector in India, Bangladesh, Pakistan, and Sri Lanka. "This will probably result in weaker harvests and exert further upward pressures on food prices in the near term. Along with higher energy prices, elevated prices of food will likely increase food insecurity across the region. Consumer price inflation in the region is expected to accelerate to 9.5 per cent in 2022, from 8.9 per cent in 2021," the forecast says.
It also observes that tighter external financial conditions will adversely affect regional growth prospects, especially for countries with high exposure to global capital markets facing debt distress or risks of debt default. "The pandemic left many countries with large fiscal deficits and higher and unsustainable levels of public debt. Sri Lanka is currently facing a debt crisis and discussing a new IMF-supported program to bring its economy out of the crisis," it notes.
Internationally, the war in Ukraine has upended the fragile economic recovery from the pandemic, triggering a devastating humanitarian crisis in Europe, increasing food and commodity prices and globally exacerbating inflationary pressures, the UN forecast says.