India’s GDP could rebound to 7.9% in 2021, says OECD
The Organisation for Economic Co-operation and Development (OECD), a club of mostly rich nations, predicted on Tuesday that the world economy will return to pre-pandemic growth levels by the end of next year, but slashed its 2021 forecast and warned that the recovery will be uneven across countries and downside risks persist.
From a contraction of 4.2% this year, global gross domestic product (GDP) is expected to bounce back to a growth pace of 4.2% in 2021, the 37-nation OECD said in a review of the global economic outlook. It reduced its growth forecast from 5% it had predicted in September. The pace of growth is expected to slow to 3.7% in 2022.
India is expected to rebound to grow 7.9% in 2021 after recording a contraction of 9.9% this year (2020-21 in its case) and expand 4.8% in 2022.
“For the first time since the pandemic began, there is now hope for a brighter future. Progress with vaccines and treatment have lifted expectations and uncertainty has receded. Thanks to unprecedented government and central bank action, global activity has rapidly recovered in many sectors, though some service activities remain impaired by physical distancing,” OECD chief economist Laurence Boone wrote in the report.
“The collapse in employment has partially reversed, but large numbers of people remain underemployed. Most firms have survived, albeit financially weakened in many cases. Without massive policy support, the economic and social situation would have been calamitous. The worst has been avoided, most of the economic fabric has been preserved and could revive quickly, but the situation remains precarious for many vulnerable people, firms and countries,” she wrote.
OECD projected that the economic recovery from the Covid-19 pandemic will be uneven across countries, potentially leading to lasting changes in the world economy. The countries and regions with effective “test, track and isolate systems,” where the vaccination will be deployed rapidly, are likely to perform relatively well, though the overall weakness in global demand will rein them in.
China, which started recovering earlier, is projected to grow strongly, accounting for over one-third of world economic growth in 2021. OECD economies will rebound, growing at 3.3% in 2021, but recovering only partially from the deep 2020 recession. The review forecast that the Chinese economy will grow 1.8% this year, 8% in 2021 and 4.9% in 2022. Boone, a French economist, stressed the need for governments to continue extending policy support.
In the case of India, OECD has predicted a marginally steeper contraction than the 9.5% forecast by the RBI in fiscal 2021. Growth “may break out of contraction and turn positive during January-March,” RBI governor Shaktikanta Das said last month.
(With agency inputs.)