World economy will struggle to bounce back from Covid-19 lockdowns: Reports

While growth in the hardest hit economies may snap back briefly, the momentum will soon fade, a financial research firm warned.

The world economy likely faces a long slog back from the coronavirus crisis as two reports out on Monday predict that global growth will struggle to bounce back from the lockdowns, travel restrictions and business closures meant to contain the pandemic.
IHS Markit said that it expects the world economy to shrink 5.5 per cent this year, triple the damage it sustained in the 2008 financial crisis, and then struggle to regain traction, news agency PTI reported.

While growth in the hardest hit economies may snap back briefly, the momentum will soon fade, the financial research firm warned. It expects the US economy to contract 7.3 per cent this year and the collective economy of the 19 European countries that share the euro currency to recoil 8.6 per cent.

Hobbling the rebound, IHS predicts, will be a wave of business bankruptcies and cautious spending by consumers trying to repair their household finances and uneasy about resuming old habits that drive economic growth shopping, eating out, booking vacations and going to movies.

Government leaders wanted to err on the side of caution, and, as a result, we basically shut down large parts of the economy, said Sara Johnson, executive director at IHS Markit.

Likewise, Deutsche Bank Wealth Management warned Monday that a hoped-for rebound in the second half of 2020 won't be strong enough to undo the damage absorbed in the first, at least among the advanced economies of the United States, Europe and Japan. "We don't expect developed economies output to be back to pre-crisis levels until 2022,'' the report said.

Covid-19: Recession for world economy; India, China likely exceptions: UN

The report 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.

The world economy will go into recession this year with a predicted loss of trillions of dollars of global income due to the coronavirus pandemic, spelling serious trouble for developing countries with the likely exception of 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 $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 $2 trillion to $3 trillion drop in investments from overseas in the next two years.

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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 $5 trillion lifeline to their economies.

"This represents an unprecedented response to an unprecedented crisis, which will attenuate the extent of the shock physically, economically and psychologically," it said.

It added that while the full details of these stimulus packages are yet to be unpacked, an initial assessment by the UNCTAD estimates that they will translate to a $1 trillion to $2 trillion injection of demand into the major G20 economies and a two percentage point turnaround in global output.

"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.

India-US free trade agreement key to ending dispute, says advocacy group

Trump has repeatedly claimed that India is a 'tariff king' and imposes 'tremendously high' tariffs on American products.

Business Standard : A free trade agreement between India and the US is a key to resolving their trade disputes as it will cover biggest irritants in ties including tariffs and mobility of Indian professionals, a top American business advocacy group has said.

Observing that the relationship between India and the US in the last five years has progressed tremendously, the advocacy group said the interest of the two largest democracies of the world are much more aligned than ever.

"The challenge which we have is that we need to work out a trade deal. And when you look forward next five years, I believe India should sign an FTA with the US. Once you have FTA, all this issue of tariffs will go away," Mukesh Aghi, president and CEO of the US-India Strategic Partnership Forum (USISPF), told PTI

An India-US FTA, he observed, would be able to address the Indian concerns over import of Chinese goods.

"Because we are concerned about Chinese goods coming to India, that under WTO guidelines, everything with the FTA, India can put as much tariff, it has no impact on US tariffs itself, he said.

"The FTA once signed should have what I call mobility on H-1B. You give FTA partner more exception," he said adding that going forward the two countries need to be creative and bold and drive this relationship on a path where there's much more better understanding on the trade side.

The H-1B visa programme, popular among Indian technology professionals, allows foreign workers to obtain temporary authorisation to work and stay in the US.

While there has not been much talks between the two countries on this issue, Aghi said he believes that FTA is key to resolving the trade disputes.

"Within the FTA, you can have BIT (bilateral investment treaty) also. It covers a lot of stuff. It takes the biggest irritants in the relationship out, he said.

"It provides mobility to Indian professionals who could come into US and work. It provides almost zero tariff for US goods coming into India. I think this has to be a bold move on part of the new government whoever comes in," Aghi said.

With India into an election mode, where the government of the day cannot take any major policy decision due to the enforcement of the model code of conduct, Aghi said this would be the recommendation of the USISPF to the new government to "be bold about it, start discussion FTA with the US because for this president (Donald Trump) trade is the biggest thing."