Global economy faced with double-dip recession, warns Anand Sharma

Commerce and Industry Minister Anand Sharma on Sunday warned that global economic growth remained extremely fragile and faced a heightened risk of going into double-dip recession.

Speaking at the CII Global Partnership Summit here, Mr. Sharma said latest projections indicated that this year the global economic growth would be around 3.5 per cent, almost at the same level as last year (3.2 per cent).

“The most worrisome is the slowdown in growth of developing economies, which grew at 5.1 per cent last year, registering perhaps the slowest growth in the last decade. The situation in Eurozone remains grim, even though there have been interventions by the European Central Bank. The U.S. is staring at a ‘fiscal cliff’ and the BRICS economies, which had emerged as pillars of stability and engines of economic growth even at the peak of the crisis, are now experiencing a slowdown. China has slowed down to 7.8 per cent in 2012 while India last year grew by 5.5 per cent. Brazil has dropped from a peak of 5.7 per cent in 2010 to just 1 per cent in 2012.

Mr. Sharma said there was a continued volatility of capital flows, especially to emerging and developing economies. Last year, the net private capital flows to emerging markets were down by 10 per cent at $1 trillion even as the emerging market economies invested over $1.3 trillion abroad.

The Minister said a major area of serious concern had been the rising food prices, which jumped to a record high in July last year though there was a softening towards the latter part of the year. Apart from the deteriorating economic situation, there was a massive social dimension to the problem as the world was faced with an unprecedented crisis of unemployment. Today, out of the global labour force of 3.3 billion, 200 million people were unemployed and over 900 million people were living on below $2 a day. Over the next decade, 400 million new entrants would enter the labour market and we were faced with a challenge of creating 600 million jobs globally.

“Countries like India will see 250 million additional job-seekers in the next 15 years as they shift from the rural economy towards urban industrial activity. There is a serious challenge for policymakers to provide enough jobs in the manufacturing and services industry and to impart adequate skillsets,” he added.

He said the G-20 had emerged as the pre-eminent global body for economic stabilisation in this time of crisis. “It is to the credit of G-20 leaders who demonstrated statesmanship in coordinating their efforts for infusing a $4-trillion stimulus in the global economy. However, we are still not out of the woods,” he said.