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Global Trends

Nevertheless, the situation debt levels hovering around a improve the quality of their he global economy is Global economies are economic turmoil. UK was European policymakers have
SEVERAL STATES has improved during the precarious level of 40 per cent budget by taking steps to T experiencing several witnessing a slowdown in already dealing with high swiftly responded to the
WITNESSED A subsequent period. This is of GSDP from 2020-21 increase revenue and curtail turbulent challenges, ranging growth, aggravated by the inflation and stagnant wages, energy crisis and built
SIGNIFICANT RISE IN indicated by the data print for onwards to the present. unnecessary expenditure. from inflation being higher aggressive policy rate hikes by in addition to a adequate gas storage ahead of
DEBT LEVELS IN FY22 which depicts a States could enhance than seen in several decades, the central banks to tame the weaker-than-expected the heating season, but
2021-21 AS STATES moderate decline in the Maharashtra and Gujarat have revenue by measures such tightening financial conditions, elevated inflation. economic recovery from the further disruptions to energy
BORROWED HEAVILY number of highly stressed succeeded in maintaining their as raising the share of the war in Ukraine, and the supplies could lead to more
states (in terms of debt to debt below 20 per cent of states’ own revenues Covid-19 pandemic. Add to
GSDP) with five states namely their GSDP, mainly due to through disinvestment of lingering effect of the US economy however that the looming energy crisis economic pain. Specifically, a
Covid-19 pandemic, all
complete shutoff of Russian
following one of the hottest
Mounting Debt Bihar (38.6 per cent), Kerala their strong industrial base state public sector weighing heavily on the reported an economic summers on record, and a gas flows to Europe through
recovery in Q3 2022, growing
(37 per cent), West Bengal
undertakings, asset
with robust revenue streams
(34.4 per cent), Punjab (53.3 while Odisha has been an monetisation etc while outlook for the global by 2.6 per cent on recession seems inevitable. the Nord Steam 1 and 2
per cent) and Rajasthan (39.5 exemplar in efficiently rationalising expenditure by economy. quarter-on-quarter basis in The economic crisis has been pipelines, combined with a
Another major worry relates
to the debt overhang of per cent) in the highly managing its finances. The replacing inefficient July-September, snapping two further perpetuated by cold winter, could result in
stressed category.
overhang of debt has, on an
subsidies such as in utilities
States. The rising expenditure average, continued in the post like power and water. Off All these developments have straight quarters of economic policies announced on tax shortages, rationing and loss
and lower revenue in the first Out of these five states, pandemic years as the state budget borrowings and resulted in a slew of contraction and quelling the cuts which would have cost in GDP. On top of these, it
year of the pandemic Punjab is most precariously economies have not fully contingent liabilities should multilateral organizations fears of an impending about 45 billion pounds. could also result in yet
compelled states to resort to placed with state’s mounting also be brought within the including the International recession. On an annual basis, Latest data suggests the UK another bout of inflation
additional borrowing to fund borrowings taking its ratio of recovered to pre-pandemic Monetary Fund (IMF) slashing the world’s largest economy economy decelerated sharply across the continent.
the fiscal gap. Several states levels. purview of the budget to its growth forecasts across recorded an expansion of 1.8 from double-digit growth of
witnessed a significant rise in debt to GSDP to a disturbing promote transparency. geographies. IMF now expects per cent in Q3 2022 as 10.9 per cent in Q1 2022 to In contrast, economies such
debt levels in 2020-21 as 53.30 per cent as per 2021-22 In view of the above, it is global growth to come down compared to 1.8 per cent 2.4 per cent in Q3 2022. as Japan and China have
states borrowed heavily revised estimates. Rajasthan recommended that the states to 3.2 per cent in 2022 from growth in Q2 2022 and 3.7 witnessed a revival in
during the pandemic. also is highly indebted with continue their effort to 6.1 per cent in 2021 and per cent in Q1 2022. Growth in Eurozone also economic activity. Japan’s
further slide down to 2.7 per experienced a slowdown to GDP growth improved to 1.8
cent in 2023. World Bank, too, The job market and 2.1 per cent in Q3 2022 per cent in Q3 2022 from 0.6
now expects global growth to consumer spending in US against 4.3 per cent growth in per cent in Q1 2022 as
slump from 5.7 per cent in remains strong, despite the Q2 2022, as Russia’s invasion robust private consumption
2021 to 2.9 per cent in 2022. increasing interest rates of Ukraine took a rising toll provided a boost to the
which is cooling the housing on its economy. IMF expects country’s long-delayed
This is the weakest growth sector. US reported lowest more than half of the recovery from the Covid-19
profile since 2001 except for unemployment in over 50 countries in the Eurozone to pandemic. While, for China
the global financial crisis and years, with the rate falling to experience technical the growth rose to 3.9 per
the acute phase of the 3.5 per cent in the month of recession, illustrating the cent in Q3 2022 after
COVID-19 pandemic. It also September 2022 against 4.0 continent’s severe economic experiencing a slowdown in
reflects a significant per cent seen in the beginning losses from the war. The the previous quarter aided by
slowdown for the largest of the year in January. As per ongoing crisis is worsened by efforts taken by the Central
economies. reports, around 7 lakh jobs the costlier supply of energy Bank to revive the economy.
have been created in the and food, as well as delays in Going forward, these
The global economy’s future manufacturing sector in the implementing critical reforms economies are expected to
health rests critically on the recent past, thereby aiding and the drying-up of financial maintain a steady growth
successful calibration of growth of the sector. resources. momentum.
monetary policies across
countries, the course of the The strong job market -
Russia-Ukraine war and the steady hiring, solid pay growth Trajectory of Real GDP Growth of Key Global Economies (% y-o-y)
possibility of further and a low unemployment 12.0
pandemic related supply-side rate, is further deepening the 10.0
disruptions caused due to challenges of the Federal 8.0
lockdowns in China. Reserve as it raises interest
rates at the fastest pace since 6.0
MAJOR ECONOMIES the 1980s to try to bring 4.0 2.4 3.9
WITNESSING A inflation down from near a 2.0 1.8 2.1 1.8
40-year high.
SLOWDOWN DUE TO 0.0
RISING INTEREST Amongst the other major Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022
RATES economies, UK and Eurozone US Eurozone UK Japan China
are facing their biggest Source: National Sources

24 ANALYSIS, RESEARCH, THOUGHT LEADERSHIP & ADVOCACY ANALYSIS, RESEARCH, THOUGHT LEADERSHIP & ADVOCACY 25
QUARTERLY JOURNAL OF ECONOMICS
QUARTERLY JOURNAL OF ECONOMICS
DECEMBER 2022 DECEMBER 2022