In its Trade and Development 2020 update, it said the relief measures adopted by India were not only much smaller in scale, but also centred on easing supply side constraints and providing liquidity support rather than aggregate demand support. UNCTAD expects India’s GDP to have contracted 6.9% in 2020 and grow 5% in 2021, attributing the stronger recovery projected for 2021 to the deeper-than-expected downturn in 2020.
“Moreover, restrictions to people’s movement not only severely affected incomes and consumption, they also proved largely unsuccessful in containing the spread of the virus,” the UN agency said in its report titled ‘Out of the frying pan… into the fire’.
As a result, it said, the fall in economic activity proved to be larger than it had envisaged in mid-2020. “The budget for the fiscal year from April 2021 to March 2022 also points to a shift towards demand-side stimulus, with an uptick in public investment (particularly in transport infrastructure) for the coming fiscal year,” it said, adding that an anticipated recovery in global demand will also help buoy the export sector through 2021.
UNCTAD said for the global economy, the overall cost of the crisis has been exorbitant with the brunt of the hit to the global economy being felt in developing countries with limited fiscal space, tightening balance of payments constraints and inadequate international support. Moreover, while all regions will see a turnaround this year, potential downside health and economic risks could still produce slippages.