Impact of global economic slowdown for India
STORIES, ANALYSES, EXPERT VIEWS
The World Bank in its latest report has state that the global economy’s “potential” growth rate is likely to hit a three-decade low of 2.2 per cent a year between now and 2030, down from 2.6 per cent in 2011-21 and 3.5 per cent during the first decade of this century. Events like Covid-19 pandemic and the war in Ukraine, have weakened almost all the key drivers of long-term economic growth.
In the words of David Malpass, President of the World Bank Group, “The result could be a lost decade in the making — not just for some countries or regions as has occurred in the past — but for the whole world.”
In its report, the Bank has shown how all the fundamental drivers of potential growth have been losing power. Be it capital accumulation (through investment growth), growth in labour force, or the growth of total factor productivity (which is the part of economic growth that results from more efficient use of inputs and which is often the result of technological changes) — all faltered in the past decade and the Bank expects all of them to slow further in the remainder of the current decade. What’s worse, as the recent bank collapses suggested, these weaknesses “could be even more pronounced if financial crises erupt in major economies and, especially, if they trigger a global recession”.
From India’s perspective writes The Indian Express the economy is “expected to grow faster than other economies……However, an all round global slowdown as well as the reasons prompting it — geopolitical tensions, reduced openness to trade, policy uncertainty — will also make it tougher for India to achieve its growth ambitions. There won’t be a rising tide of global growth as it was during the high-growth phase of 2003-2008 to provide tailwinds. For instance, demand for India’s exports, a crucial engine of domestic growth, will likely stay muted.”