India Is World’s Fastest Growing Economy: Beats US, China, Europe With 6.4% Growth Rate In 2022

According to a UN report, India is projected to grow by 6.4 per cent in 2022 but still be the fastest-growing major economy, with higher inflationary pressures and uneven recovery of the labour market curbing private consumption and investment. This is slower than the last year’s 8.8 per cent but the Ukraine conflict has impacted the global GDP.

In its World Economic Situation and Prospects (WESP) report released on Wednesday, the UN Department of Economic and Social Affairs said that the Ukraine conflict 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.

Down from the 4.0 per cent growth forecast released in January 2022, the global economy is now projected to grow by only 3.1 per cent in 2022. 

Exacerbating Inflationary Pressures

In 2022, with sharp rises in food and energy prices the global inflation rate is projected to increase to 6.7 % which is more than twice the average of 2.9 % during 2010 – 2020.

In the recent months due to the backdrop of the ongoing conflict in Ukraine, the outlook in South Asia has deteriorated. Other reasons include higher commodity prices and potential negative spillover effects from monetary tightening in the United States.

The regional economic output is projected to expand by 5.5 per cent in 2022, which is 0.4 percentage points lower than the forecast released in January.

For the fiscal year 2023, India’s growth is forecast to be 6 per cent.

Hamid Rashid, Lead Author & Chief, Global Economic Monitoring Branch, Economic Analysis and Policy Division, United Nations Department of Economic and Social Affairs said that except for East Asia and South Asia, almost all regions around the globe have been affected by high inflation.

As compared to the other countries in Latin America who had to aggressively pursue monetary tightening, India is in much better state as it did not have to do it.

Brazil has raised interest rates repeatedly.

He said that though the Indian economy is expected to recover strongly in the next one year or two, but then again one cannot completely discount the downside risk that would come from external channels.

What would persist and negatively impact the agricultural sector in Bangladesh, India, Pakistan, and Sri Lanka, according to the report, is the higher prices and shortages of farming inputs including fertilizers.

The report said that in the near term will probably result in weaker harvests and exert further upward pressures on food prices.

Along with the higher energy prices, the elevated food prices will increase the food insecurity across the region. From 8.9 per cent in 2021, the consumer price inflation is expected to accelerate to 9.5 per cent in 2022 in the region.

The report said that for the especially for countries with high exposure to global capital markets facing debt distress or risks of debt default, tighter external financial conditions will adversely affect regional growth prospects.

Many countries were left with large fiscal deficits and higher and unsustainable levels of public debt post the pandemic. 

It spoke of how Sri Lanka is currently facing a debt crisis and how it is in talks with the IMF for a new IMF-supported programme to bring its economy out of crisis.

It said the downgrades in growth prospects are broad-based.

Driven by higher energy and food prices, the growth prospects are weakening particularly in commodity-importing developing economies. It added that the outlook is compounded by worsening food insecurity, especially in Africa.

With the European Union registering the most significant downward revision, the growth forecasts for the United States, European Union and China have been revised downward.

Revised Downward Growth Rates

Down from the 3.9 per cent expected in January, the European Union economy most directly hit by disruptions in the energy supply from the Russian Federation is now expected to grow by 2.7 per cent in 2022.

US is expected to grow by 2.6 per cent in 2022 and 1.8 per cent next year.

China is expected to grow by 4.5 per cent in 2022 and 5.2 per cent in 2023.

The report said that the developing countries, as a group, are projected to grow by 4.1 per cent in 2022, down from 6.7 per cent in 2021.

UN Secretary-General Antonio Guterres while speaking of the Ukraine conflict said that the war in Ukraine in all its dimensions is setting in motion a crisis that is also devastating global energy markets, disrupting financial systems and exacerbating extreme vulnerabilities for the developing world.

He said that to ensure a steady flow of food and energy in open markets, we quick and decisive action by lifting export restrictions, allocating surpluses and reserves to those who need them, and addressing food price increases to calm market volatility.