Despite the start of the vaccination drive and a reduction in new COVID-19 infections, India’s 2021 economic output is expected to be below the 2019 level, according to a report by the UN’s Economic and Social Commission for Asia and the Pacific (ESCAP). Major challenges faced by India would be maintaining a low cost of borrowing while controlling non-performing loans. 

 

After stringent lockdowns, business disruptions hampered India’s economy in Q2 2020, while tweaking of lockdown policies and a reduction in infections led to a turnaround in Q3. But the pace of India’s recovery moderated in Q4, with growth close to zero. ESCAP estimates India’s real GDP growth rate at 7.0pc in 2021 and 6.5pc in 2022. India’s economy contracted by 7.7pc in 2020

 

China

The report states swift and effective response to the pandemic supported China’s strong strong recovery in 2020. China grew at 6.5pc in Q4 2020 amid strong industrial production, investments in infrastructure and housing, exports, and a steady recovery in private consumption. China will continue to recover in 2021 despite concerns over high financial leverage and the tweaking of stimulus policies. 

 

Asia-Pacific

The COVID-19 pandemic is still far from being decisively contained in the Asia-Pacific region. New cases, on a daily basis, is still in thousands in major South and Southwest Asian and North and Central Asian countries. The outbreak continues in Indonesia, Southeast Asia and East and Northeast Asia.

 

Developing countries in Asia-Pacific continue to improve pandemic control and have begun vaccination drives. As COVID-19 is a non-economic shock and has not resulted in the destruction of infrastructure or productive capital of economies, a swift recovery is possible, if the pandemic is controlled and eventually eliminated. 

 

Developing countries in the Asia-Pacific are likely to grow by 5.9pc in 2021 and 5pc in 2022. However, this growth, partly due to the lower base of 2020 will not be enough to get back to pre-pandemic levels. 

 

K-shaped recovery

ESCAP forecasts a K-shaped recovery driven by multiple factors, including highly uneven vaccination programs across countries. Most developing countries in the Asia-Pacific could remain exposed to the pandemic for the next one or two years. Also, the unequal sectoral impact of the pandemic is expected to significantly delay recovery across countries, especially in those dependent on tourism as well as low-skill, contact-intensive production and services sector. Fiscal policies for robust recovery is also highly uneven across economies. Another important factor is the digital and technological divide disrupting the adaptation to the new normals, such as teleworking, automation and digitalization in the post-pandemic world. 

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