India’s economy recovers steadily but lack of fuel, high oil prices may be to blame: UN report

A United Nations report has said that high oil prices and coal shortages could hamper India’s growth

United Nation:

The United Nations (UN) has said that India will grow at a rate of 6.5% from 2021 to 22, down from 8.4% of GDP in the previous financial year. The “solid path” amid rapid progress on vaccinations, coal scarcity and soaring oil prices could hamper economic activity in the short term.

The United Nations World Economic Situation and Prospects (WESP) 2022 report said that India’s GDP is expected to grow by 6.5% in fiscal year 2022, down from the estimated growth rate. 8.4% in fiscal year 2021.

Growth is expected to further slow to 5.9% in fiscal year 2023, the report said.

On a calendar year basis, the report says India’s GDP is expected to grow by 6.7% in 2022 after 9% in calendar year 2021, when the underlying effects wane.

The report said the country’s GDP growth is forecast to slow to 6.1% in 2023.

“India’s economic recovery is on a solid path, amid rapid progress on vaccinations, less stringent social restrictions and a still supportive monetary and financial outlook,” it said. note.

The WESP report further observes that for India, strong export growth and public investment are fundamental to economic activity, but high oil prices and coal shortages could hamper economic activity in the near future. Short-term.

It added: “The key will be to encourage private investment to support inclusive growth beyond the recovery.”

The report further notes that while it remains vulnerable, India is better positioned to navigate the financial turmoil than it was during the post-crisis “furious” period. 2008-2009 global financial crisis.

This is due to a stronger external position and risk mitigation measures to the bank’s balance sheet. Over the medium term, the hard-hit effects of higher public and private debt or permanent effects on the labor market could reduce potential growth and prospects for poverty reduction.

In India, inflation is expected to decelerate throughout 2022, continuing the trend observed since the second half of 2021 as curbed food prices relatively offset higher oil prices.

However, a sudden and new increase in food inflation, due to unpredictable weather, widespread supply disruptions and higher agricultural prices, could undermine food security, reduce real income economy and increasing hunger throughout the region.

The report said the global economic recovery is facing major obstacles amid a new wave of COVID-19 infections, persistent challenges in the labor market, lingering challenges in supply chains and inflationary pressure increased.

In India, a deadly wave of infections with the Delta variant claimed the lives of 240,000 people between April and June 2021 and disrupted the economic recovery.

“Similar waves are likely to occur in the near future,” the report said.

It also notes the “major step” India has taken of committing 50% of its energy mix to come from renewable sources by 2030 and reaching net zero emissions by 2070.