Brewing trouble: Indian economy to shrink 3.2% as world slips into deep recession

Four years of GST
While the first 37 meetings of the GST Council did not require voting, there have been instances of majority driven decision-making recently which could jeopardise the functioning of the GST regime.

India’s economy will contract 3.2% in financial year 2020-21 as the new coronavirus pandemic and the nation-wide lockdown announced to stop its spread pushed the economy into the worst economic crisis since Independence. The Indian economy, the sixth largest in the world, was already in the grip of a slowdown when the Covid-19 pandemic hit the nation. The GDP growth had slowed to 4.2% in the year ended March 2020, after staying in high single digits for almost a decade and a half.

“Stringent measures to restrict the spread of the virus, which heavily curtail activity, will contribute to the contraction,” a World bank report said. The impact of the global recession and the asset quality of the financial sector will have an impact on the economy despite fiscal and monetary measures to revive the economy, the report, Pandemic, Recession: The Global Economy in Crisis, said. The lockdown stalled activity in industrial and service sectors, as reflected in a sharp fall in the purchasing managers’ indices and a crash in trade activity.

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A crash in crude oil prices in 2020 will help South Asian economies, but the gains will be offset by the fall in the inflow of remittances as the West Asian economies struggle against the pandemic and the crude prices collapse.

The pandemic and steps to curb its spread have pushed the world economy into the worst crisis since the Great Depression. The global GDP will shrink 5.2% in 2020, its worst performance in 80 years. Huge fiscal and monetary packages rolled out by the governments seem to have failed to cushion the fall, says the report.

The emerging nations, the growth engine of the world economy, will see their economic output shrink for the first time in 60 years. The impact will see a fall in incomes, pushing crores of people into poverty, the report said. China, the second largest economy after the United States, will be the only major economy that will grow this year with a 1% expansion.

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Advanced economies will shrink by 7% in 2020. The US economy will contract by 6.1% before a projected rebound in 2021. More than 90% world nations will experience a contraction in per-capita incomes, the biggest percentage since 1870.

The pandemic will leave an indelible mark on the world economy. It will destroy global trade and supply chains and investment will hit rock bottom levels.