New Delhi, Jan 17 (IANS) India’s gross domestic product (GDP) is expected to grow by 7.7 percent in 2012 and 7.9 percent in the following year as compared to the estimated 7.6 percent in 2011, the United Nation’s department of economic affairs said Tuesday.
“The prospects for world economy are not good. The US and European economic growth will slow further,” said Nagesh Kumar, chief economist of the United Nations Economic and Social Commission for Asia and the Pacific.
Kumar said strong domestic demands and high savings rates would help India maintain its current level of growth momentum despite the adverse impact from the slowdown in the US and European economy.
According to the UN’s annual economic report titled “World Economic Situation and Prospects 2012″, the world economic growth will fall to 2.6 percent in 2012 as compared to the estimated 2.8 percent in 2011 and 4 percent in 2010, mainly because of the slowdown in the US and European economies.
“India will be able to weather the crisis with a little scars,” Kumar said after releasing the report here.
The US’ economic growth is projected to fall to 1.5 percent in 2012 as compared to the estimated 1.7 percent in 2011 and 3 percent in the previous year.
Growth in the European Union will fall to 0.7 percent this year as compared to the estimated 1.6 percent in 2011, the UN report said.
Kumar said Asia, especially India and China, would be the main driver of the economic growth in the coming years.
“It used to be said that when US and Europe sneeze the world gets a cold. But now the situation has changed. Today, US and European economies have cold but India and other developing economies are doing well,” he said.
South Asia’s economies are expected to grow by 6.7 percent this year and 6.9 percent next year largely driven by the growth in the Indian economy.
However, there is a significant downward risk. “In a pessimistic scenario, GDP growth in south Asia will dwindle by about two percentage points,” the report said.
South Asian economies are particularly vulnerable to volatility in commodity prices. “Double-dip recession in Europe and US would have a significant impact on economies’ activities across south Asia as both Europe and US are key export markets and a main source of tourism revenues,” it added.
On inflation, the UN economist said it was likely to moderate this year in India as well as other south Asian countries.
Inflation is projected to decline slowly, averaging 9.1 percent in 2012 and 8 percent next year as food and commodity prices ease and monetary tightening policy was likely to be reversed.
Average inflation in south Asia is estimated at 10.3 percent in 2011 and 11.6 percent in the previous year.
In India, annual inflation based on the wholesale price index fell to a two-year low of 7.47 percent in December after remaining near double-digit for almost two years, according to official data.
The UN economist said with easing inflationary pressure, India’s central bank should reverse monetary tightening to stimulate growth.