In the face of an economic slowdown, India needs to continue structural reforms necessary to boost growth, said a United Nations report Friday. The UN report ‘World Economic Situation and Prospects 2020 (WESP)’ stated that, “The combination of fiscal stimulus and financial sector reforms, boosting investment and consumption, is expected to support a recovery in growth to 6.6 per cent, but it will take continued structural reforms to bring India’s growth back to its previous levels.”
Even as the report expressed hope that a combination of fiscal stimulus and financial sector reforms will help boost consumption, it lowered India’s GDP growth estimate.
“After experiencing a sharp economic slowdown from 6.8 per cent in 2018 to 5.7 per cent in 2019, India has committed to an ambitious fiscal expansion to complement the country’s already loose monetary policy,” the WESP report said.
The report further said that one in five countries will see per capita income stagnate or decline this year, but indicated that India may be among a few countries where the per capita GDP growth rate could exceed 4 per cent level in 2020.
Significantly, the report highlighted that there could be setbacks for sustainable development if prolonged weakness in global economic activity continues and this may further impact the goals to eradicate poverty and create decent jobs for all. At the same time, pervasive inequalities and the deepening climate crisis are fuelling growing discontent in many parts of the world.
In the European Union, for instance, manufacturing will continue to be held back by global uncertainty, but this will be partially offset by steady growth in private consumption, allowing a modest rise in GDP growth from 1.4 per cent in 2019 to 1.6 per cent in 2020.
Significant headwinds notwithstanding, East Asia remains the world’s fastest-growing region and the largest contributor to global growth, as per the report.
In China, GDP growth is projected to moderate gradually from 6.1 per cent in 2019 to 6.0 per cent in 2020 and 5.9 per cent in 2021, supported by more accommodative monetary and fiscal policies.
“Growth in other large emerging countries, including Brazil, India, Mexico, the Russian Federation and Turkey, is expected to gain some momentum in 2020,” the UN report said.
The report crucially noted the shift in global economic decision-making power from the EU, the US and other developed countries towards China, India and other developing countries.
“Global cooperation mechanisms will need to recognise this shifting balance while continuing to allow the underrepresented to be heard,” it added.
Climate change risks and its impact on the economy and livelihood of people featured prominently in the report. “The changing climate poses an increasingly critical risk to forecasts. Extreme events that once were considered remote tail risks, such as hurricanes, flooding and droughts, have become much more probable, with potentially catastrophic outcomes. This has important implications for the baseline forecasts presented in this report, as the bands of uncertainty around the forecasts have become wider, especially for countries in higher-risk areas,” the report noted.
The report, while recognising the importance of school strikes by children and citizen-led movements against climate change across the globe, maintains that policymakers should lead the way on climate action. “An increasing number of private initiatives and citizen-led movements are taking place, including school strikes by children in several countries and coalitions of corporations against climate change; however, ambitious government policy, including at the multilateral level, remains the most significant lever to trigger wide-reaching change,” said the report.
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