Indian economy to grow at 7.2% in 2021, and second largest in 2022

The United Nations Conference on Trade and Development (UNCTAD) released a report on Wednesday stating the optimistic view of the global economy in 2021. 

Indian growth, as per the United Nations reports, is expected at 7.2% for fiscal 2021. The report further states that the growth might decelerate in the coming year. The anticipated constraint in the expansion is due to the government’s expenditure as a part of COVID reliefs coupled with the food inflation experienced in the country.

According to the report, there was a fall of 3.5% in the world output, which is expected to grow to 5.3% in 2021, recovering half of the loss witnessed in the last year. 

The report also stated that the Indian economy contracted by 7% in 2020; however, the GDP growth is expected to be 7.2% in 2021. Further, the United Nations report has estimated the Indian economy to grow at 6.7% in 2022, lower than 2021. However, even with the lower estimated economic growth in 2022, India is expected to be one of the fastest-growing economies globally.    

The quarterly growth of the Indian economy stood at 1.9% in the first quarter of 2021. This growth was observed due to the momentum of the economic activities post the first COVID wave in the second half of 2020, along with government expenditure on goods and services. 

The second quarter of 2020 was impacted severely by the second wave experienced in India, which resulted in forceful lockdowns. Also, we witnessed price inflation and difficulties in the vaccination rollout in quarter two. Considering this, a sharp decline in the growth in the second quarter is expected followed by gear-ups in the latter part of the year. Owing to this fact, the growth of the Indian economy is estimated to be at 7.2%, which is still not expected to be at pre-COVID levels. 

Taking a conservative approach about the resurgence of the pandemic, low-income level coupled with the low level of employment generation and the need to re-energise the private sector, the economy is expected to decelerate to 6.7% growth in 2022, UN report stated. 

The consumer inflation index before the pandemic was around 6%, which is again back to the same level after some temporary prices during the pandemic. 

UNCTAD report estimates the global economic growth rate at the rate of 5.3%. If the world economy grew by this rate, it would be the fastest in almost half a century.  

Southern Asian countries’ economies contracted sharply by 5.6% in 2020. A recovery of 5.8% and 5.7% is expected in these countries in 2021 and 2022, respectively. 

America, the economic power, is expected to grow at 5.7% in 2021, whereas 3% in 2022. On the contrary, the Chinese economy is expected to grow 8.3% in 2021 and 5.7% in 2022.   

The report suggested more multilateral coordination, which will enable wholesome development in southern countries and minimise the existing inequalities. 

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For any clarifications/feedback on the topic, please contact the writer at jyoti.arora@cleartax.in