UN’s World Economic Situation and Prospects (WESP)-2025

Why in News ?The UN’s World Economic Situation and Prospects (WESP) mid-2025 report ranks India among the fastest-growing large economies, with its GDP growth forecast revised from 6.8% to 6.3%.

Relevance : UPSC Pre & Mains

Prelims: WESP/Key findings

Mains :  GS 3 /Economy/Trade

Key Points :

1. India’s Economic Growth Forecast:

• Revised Forecast: The UN has lowered India’s GDP growth projection for 2025 to 6.3%, down from 6.8% forecasted earlier in 2024.
• Reason for Revision: The report cites weaker global demand and domestic challenges like high inflation and tighter financial conditions as reasons for the downgrade.
• Comparison with 2024: India’s GDP growth in 2024 was 7.1%, so the 2025 forecast of 6.3% indicates a slowdown but still positions India among the fastest-growing large economies.

2. India’s Position Globally:

• Fastest-Growing Large Economy: Despite the lowered forecast, India remains one of the top-performing large economies in 2025, driven by strong private consumption and public investment.
• Comparison with Other Economies:

• • Global Growth: The global economy is expected to grow at 2.7% in 2025, slightly up from 2.6% in 2024.
  • China: Forecasted to grow at 4.8% in 2025, slower than India but still significant.
  • Developed Economies: Countries like the US and European nations are projected to grow at 1.5–2%, much slower than India.

3. Domestic and Social Affairs (DESA) Report:

• Source: The forecast comes from the UN Department of Economic and Social Affairs (DESA), which publishes the WESP report.
• Key Observation: The report highlights India as a precarious global economic juncture, meaning the world economy is at a risky turning point with challenges like inflation, geopolitical tensions, and climate issues.
• India’s Resilience: Despite global uncertainties, India’s growth is supported by:

• • Strong Private Consumption: People in India are still spending, especially in urban areas.
  • Public Investment: Government spending on infrastructure (roads, railways, etc.) is boosting the economy.
  • Service Sector: India’s IT, finance, and other service sectors remain strong.

4. Challenges for India:

• Global Factors:

• • Weak Global Demand: Other countries are buying less from India due to their own economic slowdowns, affecting exports.
  • Geopolitical Tensions: Conflicts like the Russia-Ukraine war and tensions in the Middle East are disrupting global trade and raising oil prices, which impacts India as a major oil importer.

• Domestic Factors:

• • High Inflation: Rising prices of food, fuel, and other essentials are reducing people’s purchasing power.
  • Tighter Financial Conditions: Higher interest rates (set by the Reserve Bank of India to control inflation) make loans costlier, slowing down business investments.
  • Climate Risks: Extreme weather events like floods and droughts are affecting agriculture, a key sector for India’s economy.

5. UN’s Broader Economic Outlook:

• Global Economic Slowdown: The world economy is facing a precarious juncture with risks like inflation, climate change, and geopolitical conflicts.
• Emerging Markets: Other emerging economies like Brazil and South Africa are also seeing slower growth, but India and China are performing better relatively.
• Policy Recommendations: The UN suggests that countries like India should:

• • Increase Investments: Focus on infrastructure and green energy to sustain growth.
  • Address Inequality: Ensure that economic growth benefits the poor, not just the rich.
  • Enhance Global Cooperation: Work with other nations to tackle climate and trade challenges.