UN revises downwards India’s 2017 GDP growth to 7.3%

The United Nations has revised downwards India’s growth forecast by 0.4% to 7.3% in its mid-year World Economic Situation and Prospects (WESP) Report, that was released at the UN Headquarters in New York on Tuesday.

The WESP report released in January had pegged India’s growth rate for 2017 at 7.7%.

The flagship report of the world body said that India’s debt-ridden banking and corporate sectors remained a major worry for India which would make investors wary.

“Stressed balance sheets in the banking and corporate sectors will prevent a strong investment rebound in the near term,” the UN report read. The Ministry of Finance had disclosed in June 2016 that the value of Indian banks’ Non-Performing Assets (NPA) stood at ₹6 lakh crore.

Despite the economic hiccup, India would continue to remain the fastest growing major economy of the world and, is projected to grow at a higher 7.9% in 2018. India’s growth story is “underpinned by sound fiscal and monetary policies and the implementation of key domestic reforms,” the report noted.

China, on the other hand, has been projected to grow at 6.5% this year, which is in line with the UN’s growth forecast for India’s neighbour at the beginning of the year.

The report says that despite rosy growth projections for emerging economies, including India and China, the changing fiscal policy of the US under President Donald Trump could pose significant challenges for India’s growth story.

“Corporate sectors in many emerging economies are vulnerable to sudden changes in financial conditions and destabilising capital outflows, which could be triggered by faster-than-expected interest rate hikes in the United States,” the report warned.

The UN report prescribed that the current account deficit should be kept to a minimum for India to help overcome potential economic hurdles created by US fiscal policy.

International trade driving global growth

The UN report noted that the global economic growth had strengthened in the last six months, “helped by a moderate recovery in trade and investment.”

“International trade, supported by a universal, rules-based, open, non-discriminatory and equitable multilateral trading system, has been a key factor driving economic growth in both developed and developing economies,” it said.

The report forecasted that the world’s gross product would expand to 2.7% in 2017 and 2.9% in 2018.

The report, however, also stated that growth in many regions needed to pick up further if 2030 Agenda for Sustainable Development had to be accomplished.

“Looking ahead, the report advocates for renewed global commitments to deeper international policy coordination in key areas, including aligning the multilateral trading system with the 2030 Agenda for Sustainable Development; expanding official development aid; supporting climate finance and clean technology transfer; and addressing the challenges posed by large movements of refugees and migrants,” a UN statement released with the report said.