WORLD ECONOMIC GROWTH DRAWS ATTENTION FROM FINANCE MINISTER

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In the medium term, global economic growth prospects have faced further challenges due to the sluggish and uneven recovery, as highlighted by Finance Minister Nirmala Sitharaman during a seminar on sustainable growth. Since the onset of the pandemic, the world economy has grappled with various crises, negatively impacting global growth. Although recovery efforts are in progress, they remain sluggish and inconsistent,” Sitharaman stated.

“The current pace of global growth remains notably subdued, significantly below the 3.8 percent average observed in the two decades preceding the pandemic. Looking ahead to the medium term, the outlook for growth has further deteriorated.”

Sitharaman emphasized the critical need for policy coordination, both on a global and domestic scale, to steer growth back on a strong, sustainable, balanced, and inclusive trajectory. She pointed to the G20 New Delhi Leaders’ Declaration (NDLD), which underscores the urgency of implementing well-calibrated macroeconomic and structural policies to support equitable growth and enhance macroeconomic and financial stability.

Fitch Ratings has revised India’s medium-term potential growth estimate upward by 70 basis points, reaching 6.2 percent. This adjustment stems from an improvement in the employment rate and a modest increase in the working-age population forecast.

In contrast, Fitch has revised the medium-term potential growth for the ten emerging economies, lowering it to 4 percent, down from the previous estimate of 4.3 percent. This adjustment is mainly attributed to a 0.7 percentage point reduction in China’s growth estimate. Fitch explained that they have reduced China’s supply-side GDP growth potential to 4.6 percent from 5.3 percent due to the significant slowing of China’s growth and deteriorating prospects for capital deepening.

Fitch has also lowered Russia’s potential growth by 0.8 percentage points to 0.8 percent but made upward revisions to Brazil, India, Mexico, Indonesia, Poland, and Turkey compared to their previous estimates.

For India, Fitch attributes the higher growth forecast to a swift recovery in labor force participation rates following substantial declines in 2020. They increased India’s estimate by 0.7 percentage points, resulting in a potential growth rate of 6.2 percent. Fitch also noted that India’s labor productivity forecast has improved. This medium-term outlook encompasses the period from 2023 to 2027.

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