While America’s economy shrank at a 1.5% rate in the first quarter of this year, India’s economy grew at a 12% rate. But India’s growth rate is likely to fall due to the Ukraine conflict, which increases the cost of raw materials that poorer countries like India disproportionately rely upon. The Business Standard reports:
As the Ukraine conflict impacts the global GDP, India is projected to grow by 6.4 per cent in 2022, slower than the last year’s 8.8 per cent but still the fastest-growing major economy, with higher inflationary pressures and uneven recovery of the labour market curbing private consumption and investment, according to a UN report.
The UN Department of Economic and Social Affairs said in its World Economic Situation and Prospects (WESP) report released on Wednesday that the war in Ukraine has upended the fragile economic recovery from the pandemic, triggering a devastating humanitarian crisis in Europe, increasing food and commodity prices and globally exacerbating inflationary pressures.
The global economy is now projected to grow by only 3.1 per cent in 2022, down from the 4.0 per cent growth forecast released in January 2022. Global inflation is projected to increase to 6.7 per cent in 2022, twice the average of 2.9 per cent during 20102020, with sharp rises in food and energy prices, it said.
The report said that the outlook in South Asia has deteriorated in recent months, against the backdrop of the ongoing conflict in Ukraine, and higher commodity prices and potential negative spillover effects from monetary tightening in the United States.
The regional economic output is projected to expand by 5.5 per cent in 2022, which is 0.4 percentage points lower than the forecast released in January.
India, the largest economy in the region, is expected to grow by 6.4 per cent in 2022, well below the 8.8 per cent growth in 2021, as higher inflationary pressures and uneven recovery of the labour market will curb private consumption and investment, it said.
The U.S. is less impacted than India by price increases due to the Ukraine conflict, because poor Indians spend a much higher fraction of their income on food and raw materials than Americans do. India recently banned wheat exports in an effort to limit price increases.
Things like food are a much smaller part of the average American’s budget than the average Indian’s budget. America exports much more food than it imports, and is one of the largest food exporters in the world — meaning that America actually benefits from rises in the prices of many commodities. India is home to 270 million hungry people, the highest number in the world (although at least a dozen other countries have a higher percentage of their citizens chronically going hungry than India has).