Can India and China become possible exceptions in face of global recession stemming out of coronavirus lockdown?

WION Web Team New Delhi, Delhi, India Mar 31, 2020, 11.13 AM(IST) Edited By: Sonal Gera

Coronavirus in India Photograph:( AFP )

Story highlights

India reported 1,251 confirmed coronavirus cases by Monday evening, up 227 from the previous day, its steepest single-day rise.

COVID-19 has struck the entire world, especially Europe, with a stunning ferocity. Almost every country the pandemic has hit is under a partial or full lockdown, impacting not only their economy but that of the world’s too.

Experts have predicted the world economy would go into recession this year with a predicted loss of trillions of dollars of global income, spelling serious trouble for developing countries. The likely exception may be India and China, according to a latest UN trade report.

With two-thirds of the world's population living in developing countries facing unprecedented economic damage from the COVID-19 crisis, the UN is calling for a USD 2.5 trillion rescue package for these nations.

According to the new analysis from United Nations Conference on Trade and Development (UNCTAD), the UN trade and development body titled 'The COVID-19 Shock to Developing Countries: Towards a 'whatever it takes' programme for the two-thirds of the world's population being left behind', commodity-rich exporting countries will face a USD 2 trillion to USD 3 trillion drop in investments from overseas in the next two years.

The UNCTAD said that in recent days, advanced economies and China have put together massive government packages which, according to the Group of 20 leading economies (G20), will extend a USD 5 trillion lifeline to their economies.

"Even so, the world economy will go into recession this year with a predicted loss of global income in trillions of dollars. This will spell serious trouble for developing countries, with the likely exception of China and the possible exception of India," the UNCTAD said.

The report, however, did not give a detailed explanation as to why and how India and China will be the exceptions as the world faces a recession and loss in global income that will impact developing countries.

Meanwhile, the World Bank has warned that the coronavirus pandemic's economic fallout could cause China's growth to come to a virtual standstill and drive 11 million more people in East Asia into poverty.

Even in the best-case scenario, the region will see a sharp slowdown, with China's growth slowing to 2.3 per cent from 6.1 per cent in 2019, according to a World Bank report on the pandemic's impact on the region.

Under a worse-case scenario, the region could suffer its sharpest downturn since a devastating currency crisis more than two decades ago. The bank's report projects that growth in the region would slow to 2.1 per cent this year from 5.8 per cent in 2019 under a "baseline" forecast in which economic recovery takes hold this summer.

More than 11 million people could fall into poverty in the region under the worse-case scenario, the bank estimates. That's in stark contrast to its earlier forecast that growth would be sufficient this year to lift 35 million people out of poverty.

The World Bank has pledged to provide USD 14 billion in financial support through a fast-track package to strengthen the response of developing countries to the virus and expects to deploy up to USD 160 billion over the next 15 months to protect the poor and vulnerable.

The IMF has said it will commit if needed its full USD 1 trillion in lending resources to support nations hit by the virus. 

Talking of India, its shares edged up on Tuesday, tracking broader Asian peers, as unexpected upbeat factory data from China provided hope of a rebound in activity despite a spike in coronavirus cases back home.

The broader NSE Nifty 50 index was up 2.22% at 84,65.20, as of 0345 GMT, and the benchmark S&P BSE Sensex rose 2.11% to 29,040.39.

MSCI`s broadest index of Asia-Pacific shares outside Japan rose 1.1% after China`s official manufacturing purchasing managers` index (PMI) bounced to 52.0 in March, up from a record-low 35.7 in February.

India reported 1,251 confirmed coronavirus cases by Monday evening, up 227 from the previous day, its steepest single-day rise.

The government, however, said it had no plans to extend the 21-day lockdown that began last week.

According to global reports, the death toll from the coronavirus pandemic has soared past 35,000 while the number of confirmed cases topped 7,50,000 globally.