by Rajesh Kumar Sinha 3 January 2020
The year 2020 has just ended. The year has been extremely calamitous for the whole world. Especially, the pandemic Corona Virus has created such an unfortunate state where economies, infrastructure, loss of lakhs of lives, job losses, and uncertainty has gripped the whole of humanity. In these circumstances, the world had been eagerly awaiting the arrival of a new year that could bring a better, peaceful, and stable world order.
Talking of the South Asia region as a whole, the biggest challenge it is facing currently of course, along with the whole world, is the introduction and availability of the Covid-19 vaccine. Though the actual effects of the vaccine, as and when it’s introduced, is to be ascertained. Yet the availability of vaccines for nearly 20 Billion people in South Asia, almost 24.89% of the global population is a big challenge. Besides the availability of the vaccine, the gradual initiation to the most needed sections is a huge challenge that all countries in the region face in the new year 2021.
In India, the process of vaccination is about to start. The Pune-based Serum Institute of India (SSI) is to roll out the vaccination doses of Oxford-Astra Zeneca in the first week of January while Hyderabad-based Bharat Biotech is to launch indigenously researched and manufactured Covaxin. All preparations for the trial run is already done and in the first phase, healthcare professionals to be followed by senior citizens are to be vaccinated, across the country. Further, India has repeatedly assured of sharing its vaccine with other countries/people and South Asia will certainly be provided with Indian vaccines in due course.
Economists around the world have constantly talked of an effective vaccine as the prerequisite for restarting the economic growth engine. Unless people are assured of a proper remedy, they will not be comfortable going out and fully realising their economic potential, especially in the services and manufacturing sector. And the South Asian economy, including the Indian economy, is hugely dependent on these sectors for economic growth and stability.
Among the other major challenges, the world currently facing is relates to economic rejuvenation. All countries in the region have seen their economies witnessing a significant decline with the spread of Coronavirus making it even more difficult. Bangladesh, the fastest growing economy in South Asia is reportedly expecting its GDP decline to 3.8% (2020) from 7.8% (2019). The biggest economy in the region, India has reported a steep decline to -10.3% (2020) from 6.10% (2019). Nepal, Sri Lanka, Myanmar, Afghanistan, Maldives, Pakistan and Bhutan, all are expected to show a much reduced economic performance. Getting back to normalcy and enhanced economic growth is certainly going to be the most formidable challenge for all the countries in South Asia.
With economies gradually opening up, the Indian economy is expected to bounce back strongly and could well emerge as the fastest-growing major economy in 2021. Nomura has predicted it to grow 9.9% next fiscal after contracting hugely at 9.9% in 2020. OECD is expecting the Indian economy to grow at 7.9% in 2021 while Goldman Sachs and S&P, both have suggested a V-shaped Indian economic recovery, projecting a robust 10% GDP growth, The RBI too has suggested a faster than expected economic recovery and growth that is certain to further fuel economic rejuvenation in the entire South Asian region.
Bangladesh, Bhutan, Sri Lanka, and the Maldives too, are expected to perform credibly in the current fiscal. Afghanistan however, will have to factor in the difficult political situation in the country. Its faster economic transformation will depend greatly on the control of terror and the success of the ongoing peace process. Nepal is facing domestic political turmoil and its economic recovery also will depend greatly on the setting up of a stable political formation. The implicit fight between India and China, the two big powers over influence in the country, will also affect Nepal’s economy to an important extent.
Myanmar’s economy after recording the slowest growth in recent years is expected to pick up significantly. Stable agricultural growth and exports of natural gas and textiles are expected to help Myanmar grow at an impressive 5.9% in FY 2021. Pakistan too is likely to come up with an enhanced economic performance of 1.5% growth in the 2021 financial year. However, continued domestic political turmoil, unavailability of foreign funds and investments, negative global image due to the FATF list, and military tensions with India, are expected to have a major say in determining Pakistan’s economic future in 2021.
There are pressing domestic issues that countries in South Asia are confronted with. In India, economic reform measures that the government is initiating, including farm and labour reforms, are attracting a good degree of political backlash. Rabid fundamentalism is another factor that India, Bangladesh, Pakistan, and to an extent Sri Lanka are plagued with. Internal political instability is likely to have a say in the state of politico-economic of Pakistan, Sri Lanka, and Nepal.
And finally, the external influences that haves started affecting the politico-economic of Nepal (India and China), Bangladesh (India and China), Pakistan (China), Myanmar (China, India, and US), Sri Lanka (India, China, and Japan) are going to shape the politico-strategic autonomy of the region substantially in the year ahead.