Great Depression, rather than Roaring 20s, is NITI Aayog’s post-pandemic world view

Post-pandemic, the global economy could spiral into two extreme ways — the more probable scenario resembling the Great Depression and a rather slim chance of a repeat of the post-World War-1 Roaring Twenties in the US, the NITI Aayog told the Parliamentary Standing Committee on Finance on Wednesday.

The probability is more of a bipolar, more protectionist, world that, in turn, would lead to increased sensitivity towards trade, volatility in financial markets and food supply, the think tank said in its presentation to the MPs.

The Committee is chaired by BJP leader Jayant Sinha and its members include former Prime Minister Manmohan Singh.

Members, who were present at the meeting, told BusinessLine that they were briefed by NITI Aayog CEO Amitabh Kant, consultant Ajit Pai and other senior officials. The think tank foresees a drastic change in the world economic order from unipolar to bipolar with a very high degree of uncertainty.

Positive sentiment

On the current positive sentiment and momentum in global markets, the panel is learnt to have told the members that sustainability is “not as much of the question, as when it will end”. This is the key, NITI Aayog said to the possibility of the post-pandemic global economy showing a ‘Roaring Twenties-like’ trend.

“The tools to prolong the momentum to deliver a period similar to the Roaring Twenties driven by innovation, mass penetration, and domestically-driven economies are not exhausted yet — but could also possibly result in a subsequent scenario like the Great Depression that followed the Roaring Twenties,” the think tank is believed to have told the MPs.

It also fears a rise in unemployment globally as productivity improvements continue while enterprises remain cautious in the face of heightened uncertainties.

“There could be higher volatility in food supply and prices were already increasing due to climate change and conflict around the world. In financial markets too, volatility may happen due to unprecedented financial leverage and uncertainty in policy outlook from global economic powers and stalled multilateral order,” a member said.