A United Nations report on global economic prospects has projected India's economy to grow at a pace a tad lower than 8 per cent in 2012 and 2013 in view of the sharp increase in downside risks stemming from the problems in Europe and the U.S.
In its report on ‘World Economic Situation and Prospects 2012,' released here on Tuesday, it said: “India's economy is forecast to expand at a pace similar to 2011 in the following two years ... at 7.7 per cent in 2012 and 7.9 per cent in 2013.”
For the current fiscal, even as the official estimate for GDP (gross domestic product) growth stands scaled down to 7 per cent from the earlier projection of 8.5 per cent in view of the slowdown, expectations in various quarters vary and appear pegged at slightly higher levels of 7.5-7.7 per cent.
The UN report, while noting that South Asia's economies — India, Pakistan, Nepal, Iran, Bangladesh and Sri Lanka — are expected to grow by 6.7 per cent in 2012 and 6.9 per cent in 2013, accelerating slightly from 6.5 per cent in 2011, seeks to apportion blame on India's economic situation for a low regional average. “Robust domestic demand will sustain this increase, but the economic slowdown in India, where growth declined from 9 per cent in 2010 to about 7.6 per cent in 2011, brings down the regional average, it said.
In a note of caution for India, in particular, the report said: “Downside risks to the regional outlook have sharply increased in recent months…particularly in the case of India. Double-dip recessions in Europe and the U.S. would have a significant impact on economic activity across South Asia, UN economists say, as Europe and the U.S. are key export markets for South Asia and a main source of tourism revenues.”
“In a pessimistic scenario, gross domestic product (GDP) in South Asia would dwindle by about two percentage points to 5.7 per cent in 2012 and 5.8 per cent in 2013. South Asia's economies are also particularly vulnerable to volatile commodity prices,” it said.
On the issue of rising prices, the report noted that average inflation declined only slightly from 11.6 per cent in 2010 to 10.3 per cent in 2011.
As per its outlook forecast, “inflation is projected to decline slowly, averaging 9.1 per cent in 2012 and 8.0 per cent in 2013, as food and commodity prices ease and the impact of monetary policy tightening is felt in Bangladesh and India.
“But inflationary risks remain, including the threat of insufficient monsoon rains or a rise in international commodity prices,” it said.
As is already being officially conceded, the UN report also hinted at the government's inability in meeting the fiscal deficit target. Noting that the country's fiscal deficit declined to 5.1 per cent of GDP in 2010-11 as economic growth boosted tax revenues and the sale of 3G telecommunications licences increased non-tax revenues, it said: “But India's government is unlikely to reach its deficit target of 4.7 per cent of GDP for 2011-12, as lower growth brings down tax revenues, and disinvestment in state-run companies is put on hold.”
