India’s economic recovery likely to face disruption,says UN

The United Nation’s Economic forecast for India has stated that India's economy recovery could face disruption again as rising number of Omicron infections in the country. However, India’s economic recovery is on a solid path, amid rapid vaccination progress, less stringent restrictions and still supportive fiscal and monetary stances, it added. India’s GDP is projected to expand by 6.7% in 2022 after a 9% expansion in 2021, as the base effect (inflation) wanes, it said. Robust export growth and public investments will underpin the economy. However, high oil prices and coal shortages could put the brakes on economic activity in the near term. It will remain crucial to encourage private investments to support inclusive growth beyond the recovery, it said. “India has taken an important step by committing to 50% of its energy mix coming from renewable sources by 2030 and reaching net-zero emissions by 2070,” a statement by the UN read.

About South Asia’s economic recovery, the UN said it is gathering steam but remains fragile and is subject to downside risks. “Revitalizing employment growth is crucial to tackling worsening poverty and inequality,” it said. “After an estimated expansion of 7.4% in 2021, the regional GDP is projected to expand at a more moderate pace of 5.9% in 2022 as base effects gradually disappear. The recovery, however, is still fragile, uneven and subject to pandemic-related uncertainties and downside risks. A lagging labour market recovery illustrates the severe socioeconomic difficulties for large segments of the population,” the statement added.

According to the UN’s forecast, non-performing loans in Bangladesh and Bhutan were elevated even before the pandemic. While still vulnerable, India is in a better position to navigate financial turbulence compared to its situation during the “taper tantrum” episode after the 2008-2009 global financial crisis. The economy of Pakistan also remains on a relatively robust recovery path. After an economic expansion of 4.5% in 2021, the GDP growth is projected at 3.9% in 2022, driven by private consumption, record-high remittances and fiscal support.