COVID-19 causes severe disruption to Indian economy, says World Bank
Washington: The World Bank on Sunday said the coronavirus outbreak has severely disrupted the Indian economy, magnifying pre-existing risks to its outlook.
In its South Asia Economic Update: Impact of COVID-19 , the World Bank estimated the Indian economy to decelerate to 5 per cent in 2020 and projected a sharp growth deceleration in fiscal 2021 to 2.8 per cent in a baseline scenario.
The COVID-19 outbreak came at a time when India's economy was already slowing, due to persistent financial sector weaknesses, the report said.
To contain it, the government imposed a lockdown' with restrictions on mobility of goods and people.
The resulting domestic supply and demand disruptions (on the back of weak external demand) are expected to result in a sharp growth deceleration in FY21 to 2.8 percent in a baseline scenario (an estimate subject to wide confidence intervals), the report said, adding that the services sector will be particularly impacted.
A revival in domestic investment is likely to be delayed given enhanced risk aversion on a global scale, and renewed concerns about financial sector resilience.
Growth is expected to rebound to 5.0 per cent in fiscal 2022 as the impact of COVID-19 dissipates, and fiscal and monetary policy support pays off with a lag, the report said.
In a conference call with reporters, World Bank Chief Economist for South Asia Hans Timmer said India's outlook is not good.
And if the domestic lockdown is prolonged, then the economic result can be much worse than what the World Bank has in its baseline range of forecasts.
Among the steps that India can take to address this challenge, Timmer said the first step is to focus on mitigating the spread of the disease, and to make sure that everybody has food.
Then, it is very important to prepare for a rebound and that means there should be a focus on temporary jobs programmes, especially at the local levels. Those initiatives should be supported. And it is important to prevent bankruptcies especially of a small and medium sized enterprise, Timmer said in response to a question.
In the longer run, this is really an opportunity to bring the Indian economy on sustainable path not just fiscally, but also socially, he said.
The World Bank is working with India to mitigate the challenge posed by COVID-19. It has approved USD1 billion to India, of which the first tanche has already been released to deal with the emergency in the health care sector.
The first tranche aims at delivering civilian diagnostic equipment, put in place additional capacity to deal with testing and make testing available that benefits the entire population, said World Bank Vice President for South Asia Hartwig Schafer.
The World Bank is also working with India on two additional operations, which is anticipated to be ready in a matter of weeks.
These include, employment, banking and micro, small and medium enterprise sector. In its report, the World Bank said that the COVID-19 outbreak has magnified pre-existing risks to India's economic outlook.
The government is undertaking measures to contain the health and economic fallout, and the RBI has begun providing calibrated support in the form of policy rate cuts and regulatory forbearance.
Given significant uncertainties, there is a wide confidence interval around the baseline estimate. If a large-scale domestic contagion scenario is avoided, early policy measures payoff, and restrictions to the mobility of goods and people can be lifted swiftly, an upside scenario could materialize in FY21, with growth around four per cent, it said.
However, if domestic contagion is not contained, and the nationwide shutdown is extended, growth projections could be revised downwards to 1.5 per cent, and fiscal slippages would be larger, the World bank said.
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Modi-Carney talks: India, Canada seal landmark uranium deal; set USD 50 bn trade target
New Delhi (PTI): India and Canada on Monday sealed key pacts on supplies of Uranium and critical minerals and vowed to soon conclude a comprehensive economic partnership agreement, with Prime Minister Narendra Modi and his Canadian counterpart Mark Carney finalising a new framework to shore up ties including taking bilateral annual trade to USD 50 billion by 2030.
In their wide-ranging talks, the two leaders also pledged to ramp up cooperation in defence, critical technologies, small and modular nuclear reactors, education and renewable energy as Modi said the relations between the two countries are now filled with new energy, mutual trust and positivity.
Canada is set to support India's civil nuclear energy sector under the USD 2.6 billion uranium supply agreement.
The prime minister said both sides agreed that terrorism, extremism, and radicalisation are common and serious challenges not only for India and Canada but for all humanity. "Our close cooperation against these is crucial for global peace and stability," he said.
Modi and Carney also deliberated on the precarious security situation in West Asia with PM Modi asserting that India supports the resolution of all conflicts through dialogue and diplomacy.
"The current situation in West Asia is a matter of deep concern for us. India supports the resolution of all disputes through dialogue and diplomacy. We will continue to work with all countries to ensure the safety of all Indian citizens in the region," the prime minister said in his media statement.
The major outcomes of the Modi-Carney talks were their decision to expand trade relations, a move that comes amid Canada's increasingly frosty economic ties with the Trump administration.
The fresh move to bolster ties came as part of ongoing efforts by the two sides to reset the relations that came under severe strain following a diplomatic row over the killing of a Khalistani separatist in 2023.
"Our goal is to reach USD 50 billion in trade by 2030. Unlocking the full potential of economic cooperation is our priority. Therefore, we have decided to finalise the Comprehensive Economic Partnership Agreement soon.
"This will create new investment and employment opportunities in both countries," Modi said.
"Canada's pension funds have invested USD 100 billion in India. This symbolises their deep belief in India's growth story," he said.
The volume of two-way annual trade at present is around USD 13 billion.
The prime minister said the Memorandum of Understanding (MoU) on critical minerals will strengthen resilient supply chains. Canada is known for its significant reservoir of critical minerals and rare earth materials.
"In the energy sector, we are building a next-generation partnership, which will focus on hydrocarbons as well as renewable energy, green hydrogen and energy storage," Modi said.
"In civil nuclear energy, we have signed a landmark deal for long-term uranium supply. We will also work together on small modular reactors and advanced reactors," he said.
Modi said the growing cooperation between the two countries in the field of defence and security symbolises the deep mutual trust and the maturity of the relationship.
"We will work to enhance defence industries, maritime domain awareness and military exchanges. To this end, today we have decided to establish the India-Canada defence dialogue," he said.
The prime minister also highlighted the expansion of two-way ties in the education sector.
"New partnerships between several universities in AI, healthcare, agriculture and innovation are being announced. We also agreed on Canadian universities opening campuses in India," he said.
The prime minister also made a mention of how India and Canada share an "unwavering belief" in democratic values.
"We celebrate diversity. The well-being of humanity is our shared vision. This vision inspires us to move forward in every field. Today, we discussed transforming this vision into a next level partnership," he said.
In his remarks, Carney mentioned the future of India-Canada energy ties.
"Today, we are launching a strategic energy partnership with significant potential to expand bilateral energy trade. We've signed a new critical minerals partnership spanning development, processing and secure supply chains for clean energy, electric vehicles and advanced manufacturing," he said.
"We're deepening our cooperation in clean energy, expanding collaboration across wind, solar and hydrogen, because Canada has big plans as well," he said.
Carney described the uranium supply agreement as a reflection of shared commitment to clean, reliable energy.
"All of these agreements under one planet are the beginning of a new, prosperous relationship that will offer generational opportunities for workers and businesses in both their countries and which will protect the planet for future generations," he said.
Carney landed in New Delhi on Sunday after spending two days in Mumbai, where he met several industry leaders.
In the face of its tense trade ties with the Trump administration, Canada is looking at building a stronger, independent and more resilient economy.
In the last few months, India and Canada have taken several steps to normalise their relations.
India-Canada ties hit rock bottom following then-Prime Minister Justin Trudeau's allegations in 2023 of a potential Indian link to the killing of Hardeep Singh Nijjar. India dismissed Trudeau's accusation as "absurd".
In October 2024, India recalled its high commissioner and five other diplomats after Ottawa attempted to link them to the Nijjar case. India also expelled an equal number of Canadian diplomats.
However, Liberal Party leader Carney's victory in the parliamentary election in April last year helped in beginning the process to reset relations.
Subsequently, both sides have already posted their high commissioners in each other's capitals.
Last June, Modi travelled to Kananaskis, Canada, to attend the G7 summit. Modi and Carney held extensive talks on the margins of the summit with a focus on rebuilding the ties.
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