UN downgrades India’s GDP growth forecast to 7.3% in 2017

The Dollar Business Bureau

The United Nations (UN) has revised India’s GDP growth forecast downward for 2017 but projected an increase in 2018 predicting 7.9% economic growth as it warned that the banking sectors’ stressed balance sheets will have adverse impact on investments in the short-term.

The UN World Economic Situation and Prospects (UNWESP) in its mid-2017 report, launched on Tuesday, said that India is predicted to achieve a growth of 7.3% this year, downward from its earlier forecast of 7.7%, which it made when the report was launched in January.

However, the revised report forecast that the country will achieve a notable 7.9% GDP growth next year, from its earlier estimates of 7.6% made in the January report.

The report, however, cautioned that stressed balance sheets of India’s banking sector, which has become a cause of worry for the current government under Prime Minister Narendra Modi, will have adverse impact on investment recovery in the country.

“Despite temporary disruptions from the demonetisation policy, economic conditions in India remain robust, underpinned by sound fiscal and monetary policies and the implementation of key domestic reforms. Yet, stressed balance sheets in the banking and corporate sectors will prevent a strong investment rebound in the near term,” the report said.

Despite revising downward growth, the report said India continues to be the fastest growing developing economy, much ahead of its neighbour China, which is estimated to grow at a rate of 6.5% in 2017 and 2018.

The report also specified that current accounts deficits (CAD) have “visibly” narrowed in India, South Africa and Brazil, and some specific nations have undergone considerable corporate deleveraging, specifically Russia.

World gross product is likely to increase by 2.7% this year and 2.9% next year, unmoved from the previous forecast launched in January. This marks a remarkable improvement compared to only 2.3% in 2016, the report said.

The UN World Economic Situation and Prospects report also identifies a tentative revival in world industrial output, along with recovery in global trade, led mainly by increasing import demand in East Asia.