Amid hopes of a V-shaped recovery of the Indian economy, the National Statistical Office (NSO) recently estimated that India’s economic growth rises to 20.1% In the April-June quarter, despite a disastrous second wave of COVID-19, while the Gross Domestic Product (GDP) contracted 24.4% in the April-June quarter of 2020-21. Supporting these projections, in its recently launched Business and Growth Report 2021, UNCTAD forecasts global growth to reach 5.3% in 2021 and 7.2% in India.
growth prospects
According to the report, India showed strong quarterly growth of 1.9% in Q1 2021, supported by momentum in the second half of 2020 and government spending in goods and services. Meanwhile, on top of rising food and general price inflation, a severe and widely unpredictable second wave of the pandemic hit the country in the second quarter, forcing widespread lockdowns and heavy consumption and investment adjustments. Given the underlying vulnerabilities, India’s overall growth is projected at 7.2% in 2021, faster than most countries in the analysis, but still recovering from pre-COVID-19 income levels. is not sufficient.
However, going forward, the economy is likely to experience a decline in growth of 6.7% in 2022. Furthermore, and even assuming that the pandemic is completely under control, the situation looks increasingly precarious for many emerging economies. To revive and sustain growth, action is needed at both the international and national levels.
The report strongly supports India’s proposed temporary suspension of the WTO TRIPS exemption, which is seen as a necessary step to enable local manufacturing of vaccines in developing countries, but is being opposed by some advanced economies. The need for exemptions is heightened by the inability of the COVAX and C-TAP plans to raise the required resources from Northern governments and corporations.
Building resilient growth also requires a global strategy that addresses the inequalities and vulnerabilities of a financial world, as well as mitigates the threat of global warming. Given the current constraints on developing countries, there is a need for new sources of finance, including a significant increase in support from the international community in line with their commitment to common but differentiated responsibilities.
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a strong public sector
At the national level, efforts are needed to build resilience, which can only be delivered through public investment. COVID-19 has reinforced the idea that resilience is a public good and a responsibility of the state. This is to be delivered through a strong public sector with the resources to coordinate the many activities involved in making the necessary investments, providing complementary services and building resilience.
Revisiting a theme that the report, now in its 40th year, has been promoting for a long time, the challenge of mobilizing financial resources for sustained growth is considered too important to be left to market forces alone. . A financial system that gives public banks a more substantial role, guards against breaks and the emergence of megabanks, and practices stronger regulatory oversight, is less likely to generate more speculation and a healthier investment environment. more likely to provide.
The report also warned against cutting wages to boost competitiveness. Wages are an important source of demand and their increase can stimulate productivity and strengthen a stronger social contract. Fair protection against abusive practices requires a minimum wage and related labor legislation. Policies targeting informality are of particular importance for a country like India with a large informal economy.
It is important to build a healthy, diverse economy. This requires a strong industrial policy focusing on building digital capabilities. A resilient economy goes beyond offering a residual range of safety nets designed to prevent further falls to those left behind.
Rashmi Banga, Senior Economic Affairs Officer, UNCTAD
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