The contraction in the Indian economy due to the pandemic-led disruptions may disappear next year, but it can cause some irreversible damage to the economy. Although a rebound in 2021 is expected in line with the growth rates of the Indian economy in recent years, the contraction registered in 2020 is likely to translate into a permanent income loss, said ‘Trade and Development Report 2020’ by United Nations Conference on Trade and Development. The report estimated that India’s economy is likely to contract 5.9 per cent in 2020, and grow 3.9 per cent next year.
Not repeating the mistake
UNCTAD has warned India to not repeat its past mistake of announcing austerity measures. It said that among G20 countries, Argentina, Brazil, India, Mexico, and South Africa have all implemented austerity in the past years but are now struggling to access reliable sources of finance. The UN trade body has held the strict lockdown responsible for a sharp recession in the current calendar year. In the case of India, the baseline scenario is a sharp recession in 2020 as strict lockdown measures to stem the virus’ spread brought many productive activities to a halt across the country, it said.
Effect on the global economy
While India is poised to face