India’s recovery projected to be higher than other BRICS nations

The bulletin notes that the Covid-19 health crisis has led to a global economic crisis which threatens to exacerbate the vulnerabilities in the form of income inequality and poverty. It notes that India, Brazil and Russia are in the top five countries in the world in terms of infections. “Charting the expected growth recovery for 2021, India’s recovery is projected to be higher than other BRICS nations,” it said.

All BRICS countries barring China recorded a contraction in economic growth in 2020 but the countries have started showing signs of recovery since the second half of 2020, data shows. “Prompt and proactive policy support from fiscal and monetary authorities has helped to accelerate the pace of this recovery. The ongoing vaccination programmes across the world has provided a much brighter outlook for 2021,” the bulletin read.

The BRICS Economic Bulletin 2021 is prepared by the BRICS Contingent Reserve Arrangement (CRA) Research Group with members from BRICS central banks. This edition addresses the theme of ‘Navigating the Ongoing Pandemic: The BRICS Experience of Resilience and Recovery’.

When it comes to recovery, a stable and sustainable fiscal position is key to implementing counter-cyclical policies in times of recession as witnessed during the great financial crisis and Covid-19. A loose monetary policy in 2020 meant that the deficit ballooned from 4.7 per cent in 2019 to 9.8 per cent in 2020 for emerging market economies. Fiscal deficits more than doubled for Brazil and India from 2019 levels, as per data.

“The pandemic-induced fiscal support has seriously stressed the fiscal health of the governments in the BRICS. The increasing strain on public finances may have implications for long-term debt sustainability,” it said. For India, the lower tax realisation along with higher revenue expenditure coupled with falling short on disinvestment target has led to a rising fiscal deficit.

“While the pace of economic growth is gradually picking up in India and Brazil, Russia and South Africa are yet to return to their pre-pandemic levels of economic activity. Since the threat of COVID-19 remains unabated in the BRICS countries, it is difficult to estimate the robustness of this recovery,” the bulletin said.