Washington DC [USA], Oct 8 (ANI): India's economy, the largest in south Asia, is expected to contract by 9.6 per cent in the current fiscal year (2020-21) because of Covid-19 pandemic, the World Bank said on Thursday.
At the same time, south Asia is set to plunge into its worst-ever recession as the devastating impacts of Covid-19 on the region's economies linger on, taking a disproportionate toll on informal workers and pushing millions of south Asians into extreme poverty, it said in its twice-a-year-regional update.
The report titled 'Beaten or Broken? Informality and Covid-19' forecasts a sharper than expected economic slump across the region with regional growth expected to contract by 7.7 per cent in 2020 after topping 6 per cent annually in the past five years.
Regional growth is projected to rebound to 4.5 per cent in 2021. Factoring in population growth, however, income-per-capita in the region will remain 6 per cent below 2019 estimates, indicating that the expected rebound will not offset the lasting economic damage caused by the pandemic.
In previous recessions, falling investment and exports led the downturn. This time is different as private consumption -- traditionally the backbone of demand in south Asia and a core indicator of economic welfare -- will decline by more than 10 per cent, further spiking poverty rates.
A decline in remittances is also expected to accelerate loss of livelihoods for the poorest in some countries.
"The collapse of south Asian economies during Covid-19 has been more brutal than anticipated, worst of all for small businesses and informal workers who suffer sudden job losses and vanishing wages," said Hartwig Schafer, World Bank Vice President for the south Asia region.
"Immediate relief has dulled the impacts of the pandemic, but governments need to address the deep-seated vulnerabilities of their informal sectors through smart policies, and allocate their scarce resources wisely."
Three-quarters of all workers in south Asia depend on informal employment -- especially in hospitality, retail trade and transport -- sectors most affected by containment measures.
The report warns that informal workers and firms have little room to cope with unexpected shocks of the magnitude of Covid-19. While the poor have faced rising food prices and suffered severely, the Covid-19 crisis has dealt a further blow to many informal workers in the middle of the income distribution who experienced sharp drops in earnings.
Few informal workers are covered by social insurance, have savings or access to finance. The report urges governments to design universal social protection as well as policies that support greater productivity, skills development, and human capital.
In that effort, securing international and domestic financing will help governments fund crucial programs to speed up recovery.
In the long-term, digital technologies can play an essential role in creating new opportunities for informal workers, making south Asia more competitive and better integrated into markets -- if countries improve digital access and support workers to take advantage of online platforms.
"Covid-19 will profoundly transform south Asia for years to come and leave lasting scars in its economies," said Hans Timmer, World Bank Chief Economist for the south Asia region.
"But there is a silver lining toward resilient recovery: the pandemic could spur innovations that improve south Asia's future participation in global value chains, as its comparative advantage in tech services and niche tourism will likely be in higher demand as the global economy becomes more digital," he said. (ANI)