Indian Economy to Contract by 5.9% in 2020 Due to COVID: UN Report

In May 2019, India had lost the tag of being the fastest growing major economy to China.

(Photo: PTI)

The United Nations (UN), in a report, has said that the Indian economy is likely to contract by 5.9% in 2020, owing to the COVID-19 pandemic. Further, even though India’s growth will rebound in 2021, the contraction is expected to cause permanent income loss, reported PTI, citing the UN report.

The Trade and Development Report 2020, released by UN Conference on Trade and Development (UNCTAD), also pointed out that as the pandemic remains unchecked, the world economy experiences a “deep recession” and is expected to contract by an “estimated 4.3%” in 2020. This will cause a shortage of $6 trillion from what the economists had predicted before the spread of COVID-19 infection.

“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% and remittances will drop by over USD 100 billion.”   

UNCTAD report, according to PTI   

Wrong Policies Could Cause Further Damage: UNCTAD

Addressing the issue of debt levels, the report said: “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.”

“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.”   

UNCTAD report

While the report acknowledges that the biggest absolute falls in output will be in the developed world, it also says:

“But 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.”     

Further, according to the report, 90-120 million people from developing countries will be forced into extreme poverty, with about 300 million people facing food insecurity.

According to PTI, UNCTAD Secretary-General Mukhisa Kituyi said that smart actions are the need of the hour.

“The lives of future generations, indeed of the planet itself, will depend on the choices we all take over the coming months.”   

UNCTAD Secretary-General Mukhisa Kituy

(With PTI inputs.)