India retains top spot as fastest-growing economy: UN

Despite the impact of the ongoing Ukrainian crisis on the global GDP, India is projected to grow by 6.4% in 2022.

India showed a growth of 8.8% the previous year, and even after the downward adjustment, India has been the fastest-growing major economy with higher inflationary pressures and unstable recovery of the labour market curbing private consumption and investments, reveals a UN report.

A report released on Wednesday by the UN Department of Economic and Social Affairs said in its World Economic Situation and Prospects (WESP) that the war in Ukraine has negatively impacted the already fragile economic situation left by the Covid-19 pandemic, triggering a devastating humanitarian crisis in Europe, increasing food and commodity prices and globally exacerbating inflationary pressures, reports NDTV.

The report stated that the global economy can be expected to grow by only 3.1% in 2022, down from the 4.0% growth forecast released in January 2022. Additionally, global inflation is projected to increase to 6.7% in 2022, double the average of 2.9% during 2010-2020, with notable rises in energy and food prices.

Due to the on-going conflict in Ukraine, South Asia has also been deteriorating in the past several months. There has been a notable increase in commodity prices and potential negative spillover effects from monetary tightening in the United States, it said in the reports.

"India, the largest economy in the region, is expected to grow by 6.4% in 2022, well below the 8.8% growth in 2021, as higher inflationary pressures and uneven recovery of the labour market will curb private consumption and investment," it said.

Lead Author & Chief, Global Economic Monitoring Branch, Economic Analysis and Policy Division, United Nations Department of Economic and Social Affairs Hamid Rashid told reporters at the UN Headquarters that almost all regions in the world are affected by high inflation except for East Asia and South Asia.

"We expect Indian recovery to remain strong in the near term, in the next year and two, but again we cannot completely discount the downside risk that would come from external channels. So that risk is still there," he said.

The report included that the agricultural sector in Bangladesh, India, Pakistan, and Sri Lanka are expected to experience higher prices and a shortage of farming inputs including fertilisers.

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

Consumer price inflation in the region is expected to accelerate to 9.5% in 2022, from 8.9% in 2021. Elevated prices of food will likely increase food insecurity across the region.

The report also said 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 programme to bring its economy out of the crisis," it said.

The downgrades in growth prospects are broad-based, including the world's largest economies - the United States, China and the European Union - and the majority of other developed and developing economies, it said.

"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," UN Secretary-General Antonio Guterres said.

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