Issues related to Economic growth

[op-ed snap] Risks to global growth


Mains Paper 2: Economic Development| Inclusive growth and issues arising from it.

From UPSC perspective, the following things are important:

Prelims level: Basic knowledge of the newly released World Economic Situation and Prospects for 2019.

Mains level: The news-card analyses the issues and challenges w.r.t global economic growth, in a brief manner.


  • The newly released World Economic Situation and Prospects for 2019 illustrates how rising economic, social and environmental challenges hamper progress towards the United Nations Sustainable Development Goals.

Headlines do not tell the whole story

  • On the surface, the world economy remains on a steady trajectory.
  • Many developed economies are operating close to their full potential with unemployment rates at historical lows.
  • However, beneath the surface, a worrisome picture of the world economy emerges.
  • There are many risk factors that could inflict significant damage on longer-term development prospects.


  • Over the past year, trade policy disputes have escalated, and financial vulnerabilities have increased as global liquidity tightens.
  • Global private and public debt is at a record high, well above the level seen in the run-up to the global financial crisis.
  • Interest rates remain very low in most developed economies, while central bank balance sheets are still bloated.
  • With limited monetary and fiscal space, policymakers around the globe will struggle to react effectively to an economic downturn.
  • Given waning support for multilateral approaches, concerted actions like those implemented in response to the 2008-09 crisis, may be difficult to arrange.


  1. Seeds of growth not reaching the intended
  • Even if global growth remains robust, its benefits do not reach the places they are needed most.
  • Incomes will stagnate or grow only marginally this year in parts of Africa, Western Asia, Latin America and the Caribbean.
  • Many commodity exporters are still grappling with the effects of the commodity price collapse of 2014-16.
  • The challenges are most acute in Africa, where per capita growth has averaged only 0.3% over the past five years.
  • Given rapid population growth, the fight against poverty will require faster economic growth and dramatic reductions in income inequality.

2. Effects of Climate change

  • Most importantly, the transition towards environmental sustainability is not happening fast enough.
  • The nature of growth is not compatible with holding the increase in the global average temperature to well below 2°C above pre-industrial levels.
  • In fact, the impacts of climate change are becoming more widespread and severe.
  • The frequency and intensity of extreme weather events are increasing, damaging vital infrastructure and causing large-scale displacement.
  • The human and economic costs of such disasters fall overwhelmingly on low-income countries.

Way Forward

  • Many of the challenges are global in nature and require collective and cooperative policy action.
  • Withdrawal into nationalism and unilateral action will only pose further setbacks for the global community, especially for those already in danger of being left behind.
  • Instead, policymakers need to work together to address the weaknesses of the current system and strengthen the multilateral framework.
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