In 2021, India is set to reclaim its title as the world’s fastets growing major economy—which it relinquished in early 2019—according to the latest forecast from the Organisation for Economic Co-operation and Development (OECD).
As India recovers from its first-ever recession, triggered by the impact of the coronavirus pandemic and subsequent lockdowns, it is set to return from 2020’s 7.4 per cent contraction in GDP to a 12.6 per cent growth figure in 2021—the highest among the world’s 20 major economies, according to the OECD’s Economic Outlook, Interim Report March 2021.
The report projects global GDP growth at 5.5 per cent in 2021 and 4 per cent in 2022, with global output to rise above pre-pandemic levels by mid-2021. However, it notes that despite the improved global outlook, “output and incomes in many countries will remain below the level expected prior to the pandemic at the end of 2022.”
“The significant fiscal stimulus in the United States, along with faster vaccination, could boost US GDP growth by over 3 percentage points this year, with welcome demand spillovers in key trading partners,” it adds.
China is expected to grow at 7.8 per cent in 2021—slightly less than the IMF’s January forecast of 8.1 per cent GDP growth for the country. In 2021, China was the only major economy to register positive growth for the pandemic-struck year, with 2.3 per cent GDP growth.
The report notes that the rebound from the pandemic had been faster than expected with encouraging news about progress in vaccine production and deployment and a faster-than-expected global rebound in the latter half of 2020. “Activity moved above pre-pandemic levels in China, India and Turkey, helped by strong fiscal and quasi-fiscal measures and a recovery in manufacturing and construction,” it says.
Between 2017 and 2018, India lost out on its fastest-growing major economy tag following a general economic slowdown in the aftermath of the 2016 demonetisation and GST implementation and amid wider structural issues including a slump in consumer demand, a real estate slowdown, a job in job creation and in foreign investment.
A slew of reforms aimed at reducing bank’s non-performing assets, increasing limits on foreign direct investment and at boosting growth in Micro Medium and Small Enterprises (MSMEs) as well as a performance-linked incentive scheme to boost manufacturing, has helped revive India’s economic growth story.
