A severe and broadly unanticipated second wave of the pandemic, compounded by bottlenecks in vaccine rollout, hit the country in April-June on top of rising food and general price inflation, forcing widespread lockdowns and drastic consumption and investment adjustments
NEW DELHI: India’s recovery will be constrained by the human and economic cost of two consecutive waves of coronavirus pandemic and the impact of food price inflation on private consumption, UNCTAD said on Wednesday, projecting Asia’s third largest economy to grow at 7.2% in the 2021 calendar year.
“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 in its latest Trade and Development Report.
UNCTAD said, the Indian economy, which contracted 7% in 2020, grew 1.9% in the first quarter 2021, led by the momentum of the second half of 2020 and supported by government spending on goods and services. “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," it added.
In the June quarter, while year-on-year growth stood at 20.1% due to a highly favourable base, sequential growth, as estimated by S&P Global Ratings, contracted 7.5%.
UNCTAD said income and wealth inequalities have widened, and social unrest has increased 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. Going 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 added.
The report said deficient public healthcare systems and high levels of informality in South Asia magnified the impact of pandemic in terms of both health and economic outcomes, which was reflected in a stark rise in poverty rates. “UNCTAD expects the region to expand by 5.8% in 2021, with the more vigorous recovery signalled at the beginning of the year muted by a rapid surge in infections during the second quarter of 2021. Moreover, the limited progress made in terms of vaccine rollouts continues to leave the countries," it added.
UNCTAD expects global economy to see a strong recovery in 2021, growing at 5.3% after a 3.5% fall in 2020, albeit with a good deal of uncertainty clouding the details at regional and country levels over the second half of the year.
“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 said.