Context: The United Nations Conference on Trade and Development (UNCTAD) has pegged India's economic growth rate to hit a four-year high of 7.2 per cent for 2021.
India specific Findings

• With 7.2 percent India would be the fastest growing economy after China, which is projected to grow by 8.3 per cent.
• The calculations are based on GDP at constant dollars in 2015.
• In India, consumer inflation was at six per cent before the pandemic. The Covid-19 shock caused a temporary dip in prices.
• As the economy recovered and food prices accelerated, the country returned to a six per cent inflation rate in mid-2021.
• Inflation based on the Consumer Price Index (CPI) moderated to a four-month low of 5.3 per cent in August 2021 from 5.59 per cent in July 2021.
• Unanticipated second wave of the pandemic, compounded by bottlenecks in the vaccine roll-out, hit India in the second quarter, on top of rising food and general price inflation.

Global Findings

• In 2021, the global economy will bounce back with growth of 5.3%, the fastest in nearly 50 years. The rebound is, however, highly uneven along regional, sectoral and income lines.
• Growth deceleration next year could prove sharper than expected if policymakers lose their nerve or heed misguided calls for deregulation and austerity.
• Policymakers in advanced economies have not yet woken up to the size of the shock to developing countries or its persistence. Many countries in the South have been hit much harder than during the global financial crisis, while their now-heavier debt burden reduces their room for fiscal policy.

The pandemic response in developed countries has activated a resurgent state and suspended fiscal constraints, but international rules and practices lock developing countries into pre-pandemic responses and a semi-permanent state of economic stress.

• The pandemic has seen governments in the North abandon parts of the 40-year long neo-liberal policy dogma to protect lives and livelihoods amidst the COVID-19 pandemic and an unprecedented economic contraction.
• But without a more thorough revision of multilateral rules and norms, inequality will persist, the world will squander financial resources and fail to meet the challenge of the climate crisis, even as growth returns.
• Through 2025 developing countries will be $12 trillion poorer because of the pandemic; the failure to roll out vaccines could knock another $1.5 trillion from incomes across the South.

The report draws several lessons from the crisis that could help strengthen the ambition of policymakers at the national and international levels:

• Governments are not budget constrained in the way households are, but not all governments are created equal. Developing countries need support to expand their fiscal space.
• Central banks are public institutions authorized by the state to create credit. How they use that authority should reflect public policy decisions aimed at equitable growth.
• Resilience, therefore, is a public good. It can only be delivered through public investment.
• Finance is too important to be left to markets: public banks and stronger regulatory oversight can deliver a healthier investment climate.
• Cutting wages is bad for business and worse for society; wages are a critical source of demand, their growth can stimulate productivity and underpin a strong social contract.
• A healthy economy is a diversified economy. Industrial policy matters for countries at all levels of development. The question is not if, but how.
• A caring society is a more stable society and good social policy must go beyond offering a residual category of safety nets designed to stop those left behind from falling further.

Road Ahead

• The world needs more effective multilateral coordination, without which recovery efforts in advanced countries will damage development prospects in the South and amplify existing inequalities.