The United Nations on Tuesday said in a report that the Indian economy will contract by 5.9% in the 2020-’21 financial year due to the impact of the lockdown imposed to curb the spread of the coronavirus. The world body said that though there will be a recovery in the following year, the contraction will result in permanent loss of income.
The global economy, on the other hand, will contract by 4.3% this year, the United Nations said in its Trade and Development Report 2020, published by the UN Conference on Trade and Development, or UNCTAD. This will translate into a loss of $6 trillion (Rs 4,41,39,300 crore).
“In short, the world is grappling with the equivalent of a complete wipeout of the Brazilian, Indian and Mexican economies,” the report said. “And as domestic activity contracts, so goes the international economy; trade will shrink by around one-fifth this year, foreign direct investment flows by up to 40% and remittances will drop by over $100 billion (Rs 7,35,655 crore).”
The South Asian economy as a whole will contract by 4.8% in 2020-’21 and grow by 3.9% in 2021-’22, the UN said. The Indian economy will also grow by 3.9% in 2021-’22. “In the case of India, the baseline scenario is a sharp recession in 2020 as strict lockdown measures to stem the virus’ spread brought many productive activities to a halt across the country,” the UN report said. “The contraction registered in 2020 is likely to translate into a permanent income loss.”
The UNCTAD said that China will grow at 1.3% in 2020-’21, and a whopping 8.1% the following year. “This year is shaping up to be a very difficult year for the global economy,” the report said. “With many countries unprepared to respond to a health pandemic, lockdown seemed to be the only plausible way to protect lives and preserve health systems. Doing so triggered an economic crisis that spread as quickly as the virus itself.”
It said economic data for the first two quarters of the year showed that output in some cases registered the steepest drop on record. The present global recession will match the Great Depression of 1929-’33, the United Nations said. While 2021-’22 will see a recovery, it will be uneven across countries and economic uncertainty will continue.
“Debt levels across the world, in both the public and private sectors, will have risen significantly from the historically high levels registered before the crisis,” the UN report said. “In this condition, the wrong policy steps and ignoring the experience of the last decade could trigger further shocks which would not only derail recovery but could usher in a lost decade.”
The report also said that between nine crore and 12 crore people will be pushed into extreme poverty in the developing world, and 30 crore will face food insecurity. “The greatest economic and social damage will be in the developing world, where levels of informality are high, commodities and tourism major sources of foreign exchange, and fiscal space has been squeezed under a mountain of debt,” the report added.
UNCTAD Secretary-General Mukhisa Kituyi called for “smart actions” from countries to help build a better world. “The lives of future generations, indeed of the planet itself, will depend on the choices we all take over the coming months,” Kituyi said.
On September 15, the Asian Development Bank predicted that the Indian economy will contract by 9% this financial year. On September 8, American credit rating agency Fitch Ratings had sharply lowered its growth forecast for India, saying that the country’s Gross Domestic Product for the financial year 2020-’21 is expected to contract by 10.5%, instead of its earlier estimate of a 5% contraction. The agency, however, forecast that India’s economy will grow by 11% in the financial year 2021-’22 and 6% in 2022-’23.
Domestic rating agency India Ratings and Research, meanwhile, revised India’s GDP growth forecast for the financial year 2020-’21 to -11.8% from -5.3%. The agency added that it expects India’s GDP to rebound and grow at 9.9% year-on-year in the financial year 2021-’22 due to a weak base in 2020-’21.
Government data published earlier this month showed that the country’s GDP contracted by 23.9% for the April to June quarter due to the escalating coronavirus crisis.
India’s coronavirus count on Wednesday rose to 56.46 lakh after the health ministry reported a rise of 83,347 new cases in 24 hours. The toll breached the 90,000-mark, with 1,085 more deaths. More than 45 lakh people have recovered from the virus in India. The country’s mortality rate is 1.59%.