It’s a gloomy outlook for the global economy as the coronavirus pandemic continues to play havoc with the lives and livelihoods of people across the world. The world economy is expected to hit the worst recession since World War II, reducing incomes and sending millions of people into poverty in the emerging and developing nations. As per the latest projections of the World Bank, the global gross domestic product will probably shrink by 5.2% in 2020. This would be the fourth-deepest recession of the past 150 years after 1914, 1930-32 and 1945-46. The per-capita output will contract in more than 90% of the countries, pushing 70-100 million people into extreme poverty. This is the first recession since 1870 triggered solely by a pandemic. While the World Bank sees China’s economy eking out 1% growth this year, the lowest since 1976, it forecasts India’s will shrink 3.2% and the United States may contract 6.1%. In India, growth is estimated to have slowed to 4.2% in the year ending in March 2020 and output is projected to contract by 3.2% in 2020/21, when the impact of Covid-19 will largely materialise. International rating agencies like Moody’s Investors Service, Fitch Rating and S&P Global Ratings have all predicted a 4-5% contraction in India’s economic growth rate during the April 2020 to March 2021 fiscal. Crisil has said this would be the country’s fourth recession since Independence, first since liberalisation, and perhaps the worst to date.
The NDA government’s response to the widespread economic distress has been patchy and insufficient to ensure a long-term recovery. India needs to learn lessons from the pandemic and calibrate its strategies to revive the economy. There is a need for massive investments in re-skilling workers in a mission mode by identifying the areas of need and those capable of creating the maximum number of jobs. Innovative ways must be found to implement new healthcare delivery models. If India grows economically at 8% to 10%, it is seen as a large consumer market for global companies. But today’s India, which is growing only at around 4%, is protectionist, inward-looking, and does not have the resources to invest in defence — all of which make it an undesirable partner for many global leaders. The Covid-19 crisis will lead to a further decline in India’s GDP growth, down to 1.5% in 2020-21, while some are even anticipating a negative growth. Ever since the 2016 economic slowdown, the Centre has not implemented bold economic reforms that were expected of it. There has been a sustained low economic growth, rising stress on India’s financial sector, and significant deterioration in the fiscal position of governments. The real impact of the Covid-19 and lockdown would be felt in 2020-21.
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