India’s gross domestic product (GDP) will contract by 3.1 per cent in 2020, according to Moody’s Investor Service’s Global Macro Outlook report for June, which observes that the global economy has started showing signs of life, but the ‘recovery will be long and bumpy’. The effect of lockdowns will be larger than previously estimated, the report says.
“Q2 2020 will go down in history as the worst quarter for the global economy since WW-II,” says Moody’s. India’s GDP is projected to bounce back to 6.9 per cent in 2021 as a gradual recovery is predicted to start from the second half of this year. On a larger scale, the report expects G20 economies to contract by 4.6 per cent in 2020 but grow by 5.2 per cent in 2021.There is a caveat to the next year’s growth projection, both for India and the global economy. The current ongoing trade and geopolitical tensions can play spoilsport.
“The Asian countries are particularly vulnerable to changes in geopolitical dynamics, finds the report highlighting that China’s clashes with countries bordering the South China Sea, India suggest geopolitical risks rising for the entire region,” the report says. Moody’s notes that the COVID-19 crisis has amplified tensions on trade and technology between the US and China and the Phase 1 trade deal remains at risk. “Expect disagreements on trade and technology to persist after US presidential election in November… Even if the Phase 1 deal stands, progress on Phase 2 remains uncertain at best… The decoupling of US, China economies w.r.t trade, supply chains, technology &investment already underway and reorganization of global trade regime to accommodate this decoupling will be costly,” cautions the report.
