The second wave of Covid 19 seems to be continuing and the warning from health experts that the tail of the decline could be prolonged is coming true. India continues to record average of around 40,000 cases for the past 3 weeks with large numbers seen in few States continuously. The vaccination program is moving ahead though with reduced speed. The silver lining is that more companies are in the process of launching vaccines here. There are revisions in economic growth forecasts in view of the impact of the severe second wave though projections for next year have improved. We have also briefly mentioned about the change in FDI Policy.

Mixed Revision by Monetary Fund IMF – The International Monetary Fund (IMF) recently released its World Economic Outlook (WEO) forecast July 2021 report titled ‘Fault Lines Widen in the Global Recovery’. The report mentions that economic prospects have diverged further across countries since the April 2021 World Economic Outlook (WEO) forecast, as reported by Asia Law Portal. Vaccine access has emerged as the principal fault line along which the global recovery splits into two blocs: those that can look forward to further normalization of activity later this year (almost all advanced economies) and those that will still face resurgent infections and rising COVID death tolls. The report mentioned that recovery has been set back severely in countries that experienced renewed waves— notably India. It projected a growth of 9.5% for 2021 which is 3% below the previous April 2021 WEO forecast. On the other hand, the July forecast for 2022 is 8.5% for 2022 which is 1.6% above previous April 2021 WEO forecast. Growth prospects in India have been downgraded following the severe second COVID wave during March–May and expected slow recovery in confidence from that setback.

Asian Development Bank Follows Similar Pattern – The Asian Development Bank (ADB) recently released its Asian Development Outlook (ADO) Supplement, July 2021 Economic Forecasts. ADB is adjusting its 2021 growth outlook for developing Asia as renewed COVID-19 outbreaks, new virus variants, and an uneven vaccine rollout slow the recovery in some economies in the region. The report mentioned that in India, GDP growth recovered to 1.6% in Q4 of fiscal year 2020 (FY2020, ended 31 March 2021), narrowing contraction in the whole fiscal year from 8.0% estimated in April to a revised 7.3%. Then a second wave of the pandemic induced many state governments to impose strict containment measures. New COVID-19 cases daily peaked at more than 400,000 in early May, then fell to a little over 40,000 in early July. Early indicators show economic activity resuming quickly after containment measures eased. The growth projection for FY2021, downgraded from 11.0% in ADO 2021 (as reported by Asia Law Portal in April 2021) to 10.0%, reflects large base effects. The projection for FY2022, by which time much of India’s population is expected to be vaccinated, is upgraded from 7.0% to 7.5% as economic activity normalizes.

Moody’s revises forecastThe second COVID-19 wave may have a more lasting damage on the Indian economy, said Moody’s Analytics on Monday. In a report titled ‘APAC Economic Outlook: The Delta Roadblock’, Moody’s predicted that exports will once again be the foundation for recovery. It estimated economic recovery to resume by year-end. “While its second wave, which is now coming to an end, may have more lasting damage to the economy as the pandemic’s one-two punch hit small enterprises very hard, exports will once again be the foundation for recovery,” it said. Even though exports make up relatively small shares of the economy, high commodity prices have boosted the value of exports, stated Moody’s. This helped in the economic recovery after the first wave of COVID-19 too.

Review of FDI Policy – The Government of India recently issued Press Note 3 (2021 Series) providing for review of Foreign Direct Investment (FDI) Policy on petroleum and natural gas sector. As per this Press Note, a new para was inserted after the existing provision relating to petroleum and natural gas. The added new para provides that foreign investment up to 100% under the automatic route is allowed in case an ‘in-principle’ approval for strategic disinvestment of a public sector unit has been granted by the Government.

UNESCAP’s Global Survey – The United Nations Regional Commissions (UNRCs) have been conducting the UN Global Survey on Digital and Sustainable Trade Facilitation every 2 yearssince 2015, in cooperation with UNCTAD, ICC, OECD and many other organizations. The Survey provides updated and comparable information on implementation of nearly 60 trade facilitation measures in more than 130 countries around the world. As such, it enables countries and development partners to support evidence-based trade facilitation strategies and policies, share good and innovative practices and identify capacity building and technical assistance needs. The Survey includes measures specified in the WTO Trade Facilitation Agreement as well as more advanced paperless trade measures, and trade facilitation measures in support of more inclusive and sustainable trade facilitation. The 2021 Survey also covers 2 new groups of measures: Trade finance facilitation measures and Trade facilitation in times of crisis. India has scored 90.32 per cent in this survey, which is conducted every two years. This is a remarkable jump from 78.49 per cent in 2019. Under the transparency indicator, the country scored 100 per cent in 2021, up from 93.33 per cent in 2019. The score for ‘paperless trade’ improved to 96.3 per cent in 2021, from 81.48 per cent in 2019. The score in the institutional arrangement and cooperation indicator improved to 88.89 per cent, from 66.67 per cent in 2019.

Posted by Sourish Mohan Mitra

Sourish Mohan Mitra is an India-qualified lawyer from Symbiosis Law School, Pune and currently working as an in-house counsel with a global research firm in Delhi, India; views expressed are personal; he can be reached at sourish24x7@gmail.com; Twitter: @sourish247

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