The Covid-19 relief measures adopted by India were much smaller in scale than the initial announcements and not focussed on demand support, leading to a lower than expected fall in growth performance in 2020, as per a new analysis released by the United Nations Conference on Trade and Development (UNCTAD) on Thursday.

India’s GDP is estimated to post a fall of 6.9 per cent in 2020 and then grow at 5 per cent in 2021, according to calculations done by UNCTAD secretariat based on official data and estimates generated by the United Nations Global Policy.

“The deeper than expected downturn in 2020 explains in part the stronger recovery now projected for 2021,” pointed out the report titled ‘Out of the frying pan... into the fire’.

Large public spending

UNCTAD had earlier forecast a 5.9 per cent contraction in India’s GDP in 2020, in a report published in September 2020.

On India’s performance, the analysis stated that the actual fiscal stimulus fell short of initial announcements that suggested a large increase of public spending for pandemic relief.

“Restrictions on people’s movement not only severely affected incomes and consumption, they also provedunsuccessful in containing the virus,” the report added.

A misguided return to austerity after a deep and destructive recession is the main risk to our global outlook, especially in the context of fractured labour markets and deregulated financial markets, it cautioned. “It will take more than a year for output and employment to return to pre-Covid-19 levels,” it said.

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