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benefit from massive fiscal support and widespread vaccination while China is showing solid
growth amongst emerging market and developing economies (EMDEs).
Global growth is expected to grow at a moderate rate of 3.3 percent after 2022. The reasons
for this moderation range from damage caused due to supply potential across economies to
aging population resulting in slower labour force growth. Growth among EMDEs is expected
to accelerate to 6.3 percent (IMF) this year, helped by increased external demand and higher
commodity prices. However, the recovery of many countries is constrained by resurgences of
COVID-19, uneven vaccination, and a partial withdrawal of government economic support
measures. Excluding China, growth is anticipated to unfold at a mere 4.4 percent rate (World
Bank). The recovery in all EMDE regions is expected to be weighed down by the ongoing
pandemic and its legacies, which include higher debt loads and damage to many of the
drivers of potential output. In Advanced Economies (AEs) as more and more population
get vaccinated and business activities resume, the pent-up demand can act as a stimulant
to growth. As per the IMF, AEs are projected to grow at 5.6 percent in current year. The
recovery paths, however, are expected to vary within the AEs. The United States is projected
to return to end-of-2019 activity levels in the first half of 2021 and Japan in the second half.
In the euro area and the United Kingdom, activity is expected to remain below end-of-2019
levels into 2022. These variations can be traced back to different public health response across
countries, difference in adaptability of businesses to restrictions and different conditions
within these countries predating the crisis. The global outlook as of now is shrouded by
clouds of uncertainty as path of the pandemic, direction of policy actions, adaptability of the
economies and general financial conditions will decide the future. Prospects for emerging
market and developing economies have been marked down for 2021, especially for Emerging
Asia, by the IMF. Elevated inflation, especially related to high food prices, is seen as a major
risk for some EMDEs. By contrast, the forecast for Advanced Economies is revised up. These
revisions reflect pandemic developments and changes in policy support. The divergences
across countries are caused by differences in vaccine rollout and policy response. Recovery
across nations is now contingent upon the movement of these factors and how they react with
country-specific characteristics. Tailored policy response to the stages of pandemic, increased
health care spending, targeted fiscal policy support, monetary accommodation wherever
possible, macroprudential policies to contain financial stability risks and international policy
cooperation remain critical to address global ramifications of the crisis.
India had begun vaccinating its population. With coordinated efforts and use of awareness
campaigns, however, India has been progressively increasing its pace of vaccination amid an
ebbing second wave of infections.
A broad-based economic recovery in India will depend on this rate of inoculation. Moreover,
as per the World Bank, significant economic damage from the enormous second COVID-19
wave and localized mobility restrictions since March 2021 is expected. The collapse and
Annual Report 2020-21 | 183
growth amongst emerging market and developing economies (EMDEs).
Global growth is expected to grow at a moderate rate of 3.3 percent after 2022. The reasons
for this moderation range from damage caused due to supply potential across economies to
aging population resulting in slower labour force growth. Growth among EMDEs is expected
to accelerate to 6.3 percent (IMF) this year, helped by increased external demand and higher
commodity prices. However, the recovery of many countries is constrained by resurgences of
COVID-19, uneven vaccination, and a partial withdrawal of government economic support
measures. Excluding China, growth is anticipated to unfold at a mere 4.4 percent rate (World
Bank). The recovery in all EMDE regions is expected to be weighed down by the ongoing
pandemic and its legacies, which include higher debt loads and damage to many of the
drivers of potential output. In Advanced Economies (AEs) as more and more population
get vaccinated and business activities resume, the pent-up demand can act as a stimulant
to growth. As per the IMF, AEs are projected to grow at 5.6 percent in current year. The
recovery paths, however, are expected to vary within the AEs. The United States is projected
to return to end-of-2019 activity levels in the first half of 2021 and Japan in the second half.
In the euro area and the United Kingdom, activity is expected to remain below end-of-2019
levels into 2022. These variations can be traced back to different public health response across
countries, difference in adaptability of businesses to restrictions and different conditions
within these countries predating the crisis. The global outlook as of now is shrouded by
clouds of uncertainty as path of the pandemic, direction of policy actions, adaptability of the
economies and general financial conditions will decide the future. Prospects for emerging
market and developing economies have been marked down for 2021, especially for Emerging
Asia, by the IMF. Elevated inflation, especially related to high food prices, is seen as a major
risk for some EMDEs. By contrast, the forecast for Advanced Economies is revised up. These
revisions reflect pandemic developments and changes in policy support. The divergences
across countries are caused by differences in vaccine rollout and policy response. Recovery
across nations is now contingent upon the movement of these factors and how they react with
country-specific characteristics. Tailored policy response to the stages of pandemic, increased
health care spending, targeted fiscal policy support, monetary accommodation wherever
possible, macroprudential policies to contain financial stability risks and international policy
cooperation remain critical to address global ramifications of the crisis.
India had begun vaccinating its population. With coordinated efforts and use of awareness
campaigns, however, India has been progressively increasing its pace of vaccination amid an
ebbing second wave of infections.
A broad-based economic recovery in India will depend on this rate of inoculation. Moreover,
as per the World Bank, significant economic damage from the enormous second COVID-19
wave and localized mobility restrictions since March 2021 is expected. The collapse and
Annual Report 2020-21 | 183
