Global recession may not affect India, says UNCTAD

NEW DELHI: While the economic impact of the coronavirus pandemic will most certainly pull down the rest of the world into an era of recession, India and China may escape unscathed, according to a report by UNCTAD. Major G20 countries have committed massive stimulus packages to the tune of $5 trillion to salvage their economies but a possible recession stares them in the face.

“World economy will go into recession this year with a predicted loss of global income in the trillions of dollars…  with the likely exception of China and the possible exception of India,” said the report titled ‘The Covid-19 Shock to Developing Countries’. While UNCTAD chose not to elucidate why China and India would escape the recession, analysts said it was partly because of the large internal markets that these countries have and the benefit of lower energy prices.

Said Prof N R Bhanumurthy of the National Institute of Public Finance & Policy “Our growth rate will slow down in the next two quarters, but we are unlikely to slip into a recession given our internal economy and other factors.”

Calling for a $2.5-trillion package for developing countries, UNCTAD Secretary-General Mukhisa Kituyi said, “The economic fallout from the shock is ongoing and increasingly difficult to predict, but there are clear indications that things will get much worse for developing economies before they get better.” UNCTAD believes that given the global conditions, fiscal and foreign exchange constraints would tighten over the course of the year and developing nations would face a $2-3 trillion financing gap over the next two years.

Developing countries hit

Within two months of the virus spreading beyond China, developing countries have taken a hit in terms of capital outflows, growing bond spreads, currency depreciations and lost export earnings