2021: Dark clouds and silver linings | Business Standard Column

Clipped from: https://www.business-standard.com/article/opinion/2021-dark-clouds-and-silver-linings-121011301650_1.html

Fresh hopes on the economic, health and political front temper the grim legacy of 2020

2020 was an awful year for the world, with, in round numbers, nearly 90 million officially recorded cases of Covid-19, two million deaths and a fall in world GDP by 5 per cent, the biggest drop since the Great Depression of the 1930s. Thanks, largely to the rank incompetence of the Trump administration, the world’s leading superpower led the charts with more than 20 million infections and over 350 thousand deaths, six times the fatalities suffered by American forces in the 15-year long Vietnam War.

As the new year dawned a fortnight ago, a second wave of the pandemic was raging in the Americas and Europe and getting a second wind in the hitherto lightly-affected geographies of Africa and East and Southeast Asia. In the last two months of 2020 and the first week of the new year, the world’s most populous, rich democracy suffered an unprecedented onslaught on its democratic institutions from the election-losing incumbent president, Donald Trump, and his henchmen. Brexit also became final, with significant likely economic costs for Britain and the European Union she left. India didn’t go unscathed, with unprecedented damage to her economy and the second highest official tally of Covid infections (10 million) and third highest number of deaths (150 thousand).

It’s hard to think of any new year since the Second World War that began with such an awful legacy. Against this dark and cloudy backdrop, let us celebrate some bright silver linings.

First, in the US, democracy extracted accountability for awful governance. In the close fought November election, Mr Trump lost to Democrat Joe Biden, with Kamala Harris as the winning vice-presidential candidate. Despite enormous pressures from Mr Trump and the gang, the American election system delivered the goods in the form of a presidential election officially judged to be one of the fairest and cleanest in recent US history. Remarkably, Republican election officials did not bend to direct bullying and threats from President Trump. His subsequent two-month campaign of mendacious charges of election fraud were thrown out in over 60 different court cases across the country, sometimes by judges appointed by him, testifying to the independence and probity of the American judicial system.

Second, in the extraordinarily important run-off elections for the two Senate seats in Georgia on January 5, the black American pastor Raphael Warnock and the liberal Jewish journalist, Jon Ossoff, won their seats against enormous odds, thereby wresting Democratic control of the 100-member US Senate from the Republicans and clearing the path for Biden’s cabinet and other appointments as well as his legislative agenda. Many credit these victories, as well as Mr Biden’s win in Georgia, to the amazing work done by the black Amercian lawyer-politician Stacey Abrams in promoting registration of hundreds of thousands of previously disenfranchised black voters in Georgia over the past decade. Third, the shameful, Trump-incited storming of the US Capitol on January 6 by white-supremacist, “domestic terrorists” will lead to a historic second impeachment of Mr Trump and significant discrediting of his undeniable popularity with 35-40 per cent of the US electorate and thereby diminish his astonishing sway over the Republican party. The jury is out on this.

Fourth, though the huge health, economic and social costs of Covid will plague the world for a good while longer, the spate of new vaccines launched by Pfizer, Moderna, Oxford-Astrazeneca, Bharat Biotech and companies in Russia and China over the past few weeks, augur well for 2021. They also exemplify the enormous, cumulative value of long-term investment in science and technology for global welfare.

Fifth, the Biden presidency will likely ensure a swift return by the US to a much more pre-Trump, multilateralist approach to international political, economic and social issues, including: Renewed membership of the World Health Organization and the 2015 Paris accord on climate change; reengagement with the Iran nuclear accord; resurrection of American leadership in institutions like G-7, G-20 and NATO; and possible membership of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership. It may also lead to a more allies-based approach to China’s burgeoning economic, political and military power. All this is likely to be good for global economic and political welfare.

Sixth, the world economy will recover quite fast, although at varying speeds across different geographies. Nations of East and Southeast Asia will lead the pack, reflecting their demonstrated resilience to the manifold challenges of the pandemic. The IMF expects global GDP and trade in 2021 to reach levels close to those in 2019 with significantly better outcomes in Asia. China’s GDP could be 10 per cent higher in 2021 than in 2019, while that of US and Europe remains below that benchmark.

In India too some silver linings shine brightly. The “First Advance Estimates” released by the National Statistical Office last week projects fiscal 2020-21 GDP growth at (-) 7.7 per cent, implying that GDP growth in the second half (y-o-y) had climbed back to almost zero after the first quarter plunge of 24 per cent. That means the level of real GDP in the second half had recovered strongly and was close to that of 2019-20. Even if there is little further increase over that level in fiscal 2021-22, full year growth should be 9-11 per cent because of the much lower base in the first half of the current year. The NSO’s projection for 2020-21 GDP is avowedly tentative and possibly optimistic. In any case, the Indian economy will rebound strongly in 2021-22, even though the extremely dire employment situation is likely to persist, along with the increased poverty that goes with it.

Second, declining trends over the past quarter in the level of new Covid infections and deaths is very heartening. As Sajjid Chinoy of J P Morgan has noted recently, cumulative Covid deaths recorded per million of population up to end 2020 in India were “only” around 109, compared to 587 globally, 227 in developing countries and 828 in developed nations. However, it was still four times greater than for developing Asia as a whole. Third, the Astrazeneca vaccine, produced by Serum Institute of India, Pune, will start being distributed to priority categories on January 16, with Bharat Biotech’s Covaxin to follow shortly. The first 300 million Indians are expected to be inoculated by July.

Many dark clouds persist, but some silver linings are real. Happy New Year!The writer is honorary professor at ICRIER and former chief economic adviser to the Government of India.

Views are personal

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