MONEY MATTERS

The UN in its report on ‘World Economic Situation and Prospects 2012’ has said “India’s economy is forecast to expand at a pace similar to 2011 in the following two years….at 7.7% in 2012 and 7.9% in2013.” The official estimate for GDP growth stands at 7% which is lesser than the earlier projection of 8.5%. Because of this slow down, expectations in various quarters vary and appear to be pegged at 7.5-7.7%. The UN has also reported that the South Asian countries like India, Pakistan, Nepal, Bangladesh, Iran and Sri Lanka will have an economic growth of 6.7%in 2012 and 6.9%in 2013. They have blamed India’s economic situation for a low regional average. The UN said “Robust domestic demand will sustain this increase, but the economic slowdown in India, where growth declined from 9% in 2010 to about 7.6% in 2011, brings down the regional average.”

In a note of caution the report said: “Downside risks to the regional outlook have sharply increased in recent months….particularly in the case if India. Double dip recessions in Europe and the U.S. would have a significant impact on economic activity across South Asia, as Europe and the U.S. are key export markets for South Asia and a main source of tourism revenues.” It said “In a pessimistic scenario, gross domestic product in South Asia would dwindle by about two per cent in 2012 and 5.8 per cent in 2013. South Asia’s economies are also particularly vulnerable to volatile commodity prices.” As per its outlook forecast, “Inflation is projected to decline slowly, averaging 9.1% in 2012 and 8.0% in 2013, as food and commodity prices ease and the impact of monetary tightening is felt in India and Bangladesh.”

The government’s inability to meet the fiscal deficit target is also hinted at the report, by the U.N. It said, “But India’s government is unlikely to reach its deficit target of 4.7% of GDP for 2011-2012, as lower growth brings down tax revenues, and disinvestment in state run companies is put on hold.”

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