New Delhi, April 17: United Nation’s Economic and Social Survey today followed the World Bank in warning that war in Iraq would impact India’s economic growth, reducing GDP growth estimates for India from 6 per cent to 5.1 per cent.
The Escap (UN’s Economic and Social Commission for Asia and Pacific) report blamed the Iraq war, severe acute respiratory syndrome (SARS) virus and the depressed situation in western markets, where India sells most of its exports, for the lowered growth estimates. Despite the lowering, India, along with China and Vietnam, has been projected as the fastest growing nations in the region.
The World Bank had earlier reduced the Indian sub-continent’s GDP growth projections to 5.3 per cent for the calendar year 2003. Falling exports, the attendant inflation rate and economic slow-down are being blamed for this downside.
Today’s Escap report said: “The region performed well in 2002. Growth was based on stimulative fiscal and monetary policies and on strong intra-regional trade. However, prospects for 2003 are conditioned by war in Iraq and its aftermath, impact of SARS and growth in the US, Japan and the EU.”
Releasing the report here, Nagesh Kumar, director general of Research and Information System (RIS) for non-aligned and other developing countries, said the Indian economy might not be affected so badly as projected by the Escap survey. It might still recover to post 5.5-5.6 per cent growth this year.
“Since the Iraq war was short, my hunch is that India’s GDP will grow in the region of 5.5-5.6 per cent. If oil prices fall, we might end up with 6 per cent growth,” he said.
The report states global economic growth rate too would be hit falling to 2.3 per cent against an earlier projection of 2.8 per cent. The Escap region as a whole would grow by 5 per cent, mainly because of strong growth likely to be posted by China at 7.5 per cent. However, the report does not explain how the Chinese economy could maintain its growth momentum despite being badly mauled by the SARS virus.
The report said key issues which India would try to solve during the year include trade liberalisation, simplification of trade and investment regime and further reductions in export and import restrictions.
It said the fact that FDI to India grew to $ 4 billion in 2002 despite weakening of the global economy, was a reflection of the ongoing improvement in infrastructure and liberalisation of foreign investment policies. The bulk of the FDI went to engineering industries, services, electronics and electrical equipment, chemicals and allied products, food and dairy products and infotech industries. The report pointed out that all this had shored up the Indian currency, giving it stability against the dollar and making investments into India attractive.
It also credited India for improving its credit ranking by turning from a moderately indebted country to low-indebted country with a fall in debt-GDP ratio from 38 per cent in 1991 to 13.3 per cent in 2002.