Sustained recovery of private investment remains a crucial challenge, says report
Economic activity at the global level is expected to expand at 3% in 2019, but there are signs that growth may have peaked
NEW DELHI :
The Indian economy is expected to accelerate in 2019-20 to expand by 7.6% from 7.4% in the year ending 31 March on the back of robust growth in private consumption, while private investment may continue to remain sluggish, according to the World Economic Situation and Prospects (WESP) report released by the UN on Wednesday.
“Economic growth continues to be underpinned by robust private consumption, a more expansionary fiscal stance and benefits from previous reforms. Yet, a more robust and sustained recovery of private investment remains a crucial challenge to uplifting medium-term growth," the UN report said.
The International Monetary Fund (IMF) on Monday projected India’s growth at 7.5% in 2019-20 amid slower global expansion.
Rating agency Crisil Ltd in its India outlook said on Wednesday growth will be marginally better in 2019-20 at 7.3% from 7.2% in 2018-19 as estimated by the Central Statistics Office.
“For fiscal 2020, sustaining the momentum in overall investments will be a tough task without support from private investments. With continuously improving capacity utilization and the end of the de-leveraging phase for corporates, conditions are ripe for a revival of private corporate investments," Crisil said. Crisil pointed out the outcome of the upcoming general elections due by May as a potential risk to growth. “If the general elections this year were to yield a fractured mandate and derail/delay the process of reforms, the implications on sentiments, investments and growth could be adverse," it added.
Strengthening labour market indicators is a crucial aspect to forge a more inclusive development trajectory in South Asia. However, employment growth has recently slowed down in the region, and female labour force participation remains low and declining.
In addition, youth unemployment is a major concern in several economies, especially given the growth of working-age populations.
Pointing out the challenges in employment growth, the UN said in India, job creation rates in the formal sector have been feeble, leaving many workers underemployed or in low-salary jobs, with the situation for youth particularly worrisome. “In fact, well-educated youths are struggling to find jobs in the formal sector, and most of them are absorbed into low-paying and vulnerable jobs in the informal sector," it added.
The fiscal policies across the region have gradually moved to a more expansionary stance; thus, fiscal deficits are projected to remain elevated. To avert sustainability concerns, medium-term consolidation plans are required in some economies, particularly those with a fragile tax base and elevated levels of debt. The UN said in India, since the size and composition of public budgets have been important in promoting growth and prioritizing subsidies and welfare payments, any reduction of the fiscal deficit in the near term will be difficult