United Nations body sees 5.9% fall in India's GDP

United Nations: Impacted by disruptions caused by the Covid-19 pandemic, India's economy is forecast to contract by 5.9 per cent in 2020, the UN has said in a report, warning that while growth will rebound next year, the contraction is likely to translate into a permanent income loss. The Trade and Development Report 2020 by UN Conference on Trade and Development (UNCTAD) said on Tuesday that the world economy is experiencing a deep recession amid a still-unchecked pandemic.

It said the global economy will contract by an estimated 4.3 per cent this year, leaving global output by year's end over $6 trillion short (in current US dollars) of what economists had expected it to be before the coronavirus began to spread. "In short, the world is grappling with the equivalent of a complete wipeout of the Brazilian, Indian and Mexican economies. 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 per cent and remittances will drop by over $100 billion," the UNCTAD report said, painting a grim picture of the global economic scenario. UNCTAD expects South Asia to contract 4.8 per cent in 2020 and recover to 3.9 per cent in 2021. India's GDP is forecast to contract 5.9 per cent in 2020 and recover to 3.9 per cent next year, the report said. "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," it said.

The report said that while UNCTAD expects a rebound in India's GDP growth in 2021 in line with the growth rates of the Indian economy in recent years, "the contraction registered in 2020 is likely to translate into a permanent income loss".

In the US, UNCTAD expects GDP to fall 5.4 per cent in 2020 and recover 2.8 per cent in 2021. China is expected to register an economic growth of 1.3 per cent this year and a whopping 8.1 per cent in 2021, the report said, recording the highest economic growth rate in the world. "This year is shaping up to be a very difficult year for the global economy. 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," the UN trade agency added. Data for the first two quarters of this year show output contracted more sharply than in 2008-2009, and in some cases registering the steepest drop on record.

Estimates for the year point to a generalised global recession matching the Great Depression of the 1930s, it said.

While 2021 will likely see a rebound, it will be uneven within and across countries and uncertainty will persist, the report said, warning that unemployment will be on an upward trend, more and more companies will be facing the threat of bankruptcy; supply chains will be fragile; confidence will be shaken and demand will be weak.