The United Nations Conference on Trade and Development (UNCTAD) on Wednesday said in its report that India’s economic recovery will be impacted by the two consecutive waves of the COVID-19 pandemic.
Although the prediction for the Indian economy to grow this year is 7.2 per cent, the report highlighted that the economic growth could decelerate in the coming year.
It is the human and economic cost of the pandemic, along with the negative impact of food price inflation on private consumption, that will influence the effect.
The UNCTAD’s report was on Trade and Development, which projected the economic growth of countries and calculated India’s pace will be faster than the major economies of the world in the next year. Although the growth would be slower than the current year, the 6.7 per cent will still outpace others.
“In India, consumer inflation was already at 6% before the pandemic. The COVID-19 shock caused a temporary dip in prices, but as the economy recovered and food prices accelerated, the country returned to a 6% inflation rate in mid-2021,” UNCTAD said.
The Indian economy contracted 7 per cent in the year 2020 and was supported by the government’s spending on goods and services, but received a positive growth in the first quarter of 2021 when it grew 1.9 per cent.
“Meanwhile, a severe and broadly unanticipated second wave of the pandemic, compounded by bottlenecks in vaccine rollout, hit the country in the second quarter, on top of rising food and general price inflation, forcing widespread lockdowns and drastic consumption and investment adjustments,” the report added.
The intergovernmental body added that the inequalities in income and wealth have expanded and there has been an increase in social unrest in India. “Given the inherent fragilities in coping with the pandemic and restoring employment and incomes, growth in 2021 as a whole is estimated at 7.2%, insufficient to regain the pre-covid-19 income level.
forward, assuming a resurgence of the pandemic to the degree experienced in the second wave, a revitalisation of private sector activity, subject still to a slow recovery of jobs, is likely to be matched with a more adverse policy environment, especially on the fiscal front, and with continuing pressures on the trade balance. On these conditions, the economy is expected to decelerate to 6.7% growth in 2022,” it said.
The global economy is expected to recover in 2021 at a growth rate of 5.3 per cent, the body said. Although with the risk of the pandemic being maintained over, the subcontinents will have a certain element of uncertainty. “However, considering the average annual global growth rate of 3% in 2017-2019, world income will still be 3.7% below where its pre-pandemic trend would have put it by 2022. Based on the nominal gross domestic product (GDP) estimates for this year, the expected shortfall represents a cumulative income loss of about $10 trillion in 2020–21. Looking ahead, UNCTAD expects world output to grow 3.6% in 2022,” the report added.