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UN Conference on Trade and Development (UNCTAD) has said that India’s economy, estimated to contract by 6.9 percent in 2020 due to the coronavirus pandemic, is forecasted to record a stronger recovery in 2021 and grow by 5 percent. It also said the country's current fiscal year budget points to a shift towards demand-side stimulus, with an uptick in public investment.

The UN agency has stated that India’s growth performance in 2020 fell below its mid-2020 expectations. It said actual fiscal stimulus fell short of initial announcements that suggested a large increase of public spending for pandemic relief. It also noted that the relief measures adopted by India were not only much smaller in scale, but also centred on easing supply-side constraints and providing liquidity support rather than aggregate demand support. Moreover, it said restrictions to people’s movement not only severely affected incomes and consumption, they also proved largely unsuccessful in containing the spread of the virus. As a result, the fall in economic activity proved to be larger than we had envisaged in mid-2020.

It further said the budget for the fiscal year from April 2021 to March 2022 also points to a shift towards demand-side stimulus, with an uptick in public investment (particularly in transport infrastructure) for the coming fiscal year. It added that an anticipated recovery in global demand will also help buoy the export sector through 2021.