The United Nations and the International Monetary Fund (IMF) have projected that the Indian economy will bounce back strongly in the calendar year 2021 by leaving the pandemic blues behind.
The World Economic Situation and Prospects 2021, produced by the United Nations Department of Economic and Social Affairs (UN DESA), said the Indian economy is likely to contract by 9.6 percent in 2020 as a result of the lockdown and reduced consumption, but 2021 will be the year of recovery with an estimated 7.3 per cent growth.
The UN report said the COVID-19 pandemic’s impact on the world economy was 2.5 times more than the global economic meltdown of 2009. It will revive by about 5 per cent in 2021, but that may not suffice looking at the losses of the previous year.
“The devastating socio-economic impact of the COVID-19 pandemic will be felt for years to come unless smart investments in economic, societal and climate resilience ensure a robust and sustainable recovery of the global economy,” the UN DESA report said.
Despite drastic fiscal and monetary stimulus, the Indian economy will shrink by 9.6 per cent in calendar year 2020 due to lockdowns, containment efforts and reduced domestic consumption.
The year 2021 will see India grow at 7.3 per cent — the fastest in the world, with China second at 7.2 per cent projected growth target, the report said. As per the estimate, after a splendid recovery in 2021, the Indian economy will again go down by 5.6 per cent in 2022.
On the contrary, the International Monetary Fund’s (IMF) latest World Economic Outlook Update projected that India’s rebound after the pandemic-induced lockdown has just begun and would continue beyond 2021.
The IMF on Tuesday projected an impressive 11.5 per cent growth for India in 2021, projecting the country as the only major economy of the world that will register a double-digit growth this year. China will grow at 8.1 per cent in 2021, followed by Spain (5.9 per cent) and France (5.5 per cent).
The IMF says India will grow by 6.8 per cent in 2022 and China by 5.6 per cent.
IMF managing director Kristalina Georgieva had recently said: “India has taken very decisive action, very decisive steps to deal with the pandemic and to deal with the economic consequences of it.”
The UN DESA report suggests South Asia’s growth in 2021 will be at 6.9 per cent, thus making up for the losses of 2020. “The pandemic and the global economic crisis have consequently left deep marks on South Asia, turning this former growth champion into the worst performing region in 2020,” the report stated. The region will grow at the rate of 5.3 per cent in 2022, allowing it to go beyond its 2019 performance.
“While trade, remittances and investment are expected to pick up in 2021, as much of the global economy moves towards recovery from the widespread lockdown, investment and domestic consumption in many South Asian countries will nevertheless remain subdued owing to the continuing threat of the pandemic and the scarring effects of the crisis,” the UN report said.
India’s eastern neighbours like Bangladesh and Nepal, which are dependent on foreign trade and tourism, too, will come back strongly in 2021.
The report suggested that South Asian countries should formalise labour markets and improve social protection to mitigate the impact of the pandemic on the poor.