India economic outlook for 2021 ‘highly fragile’ as country is now the ‘new pandemic hotbed’, cautions UN

Bounceback in 2022 forecast to see India become fastest growing economy in the world

A worker checks a machine at the Hindustan Syringes factory in Faridabad on 2 September, 2020. (AFP via Getty Images)

The United Nations has forecast that India’s output will surge by 10.1 per cent in 2022 becoming the world’s fastest growing economy – but not before a “highly fragile” remainder of this year due to the ongoing Covid crisis.

India has become the “new hotbed of the pandemic”, the UN said in its mid-year economic update, with the outbreak of Covid-19 in the country still highly fluid.

The UN raised India’s growth forecast to 7.5 per cent for the calendar year 2021, up only 0.2 per cent from its previous projection in January.

“India has been particularly affected by a brutal second wave, which is overwhelming the public health system in large parts of the country,” the UN’s World Economic Situation and Prospects report said on Tuesday.

With the GDP growth projected at 10.1 per cent in 2021, India would become the fastest growing economy in the world – well ahead of China which is expected to grow at 5.8 per cent from 8.2 per cent in 2021.

"India, with daily new infections averaging over 300,000 during the third week of April, is now the new hotbed of the pandemic. The worst is far from over for Brazil, Argentina, Peru, and Colombia," the report said.

The UN noted a “bleak” outlook for the majority of countries in Africa, South Asia as well as Latin America and the Caribbean.

The global economy, however, showed an upward trajectory of growth with expansion by 5.4 per cent in 2021 following a slow growth rate of 3.6 per cent in 2020 according to the report.

"Amid rapid vaccinations and continued fiscal and monetary support measures, China and the United States - the two largest economies - are on the path to recovery."

It said India as well as other countries' slow vaccination drive would threaten broad-based global recovery.

India has administered just 10 vaccine doses per 100 people so far, compared to 68.2 per 100 people in the US, 12.4 in Russia, and 13.6 in Latin America and the Caribbean, the report said.

India suffered the third-highest contraction in selected G20 economies in terms of investment growth in the year 2020, dropping to 10.2 per cent tailing Mexico on 18.2 per cent and South Africa with 17.5 per cent.

New York’s credit rating agency Moody’s Investors Service on Tuesday also slashed India’s growth forecast for 2021 to 9.3 per cent due to coronavirus. It said the second wave has hampered economic recovery and increases risk of longer-term scarring.