Export Performance of India after

COVID-19

PROJECT REPORT
SUBMITTED TO

Dr. BHIMRAO AMBEDKAR UNIVERSITY

AGRA
FOR THE FULLFILLMENT OF

CERTIFICATE IN FACULTY

2024-25
UNDER THE SUPERVISION OF

DEPARMENT OF PHYSICS
INSTITUTE OF BASIC SCIENCES
KHANDARI, AGRA

BY
YOGESH KAUSHIK
 Format of Supervisor Certificate

This is to certify that Mr. YOGESH KAUSHIK has worked for the Bachelor of
commerce (certificate/Diploma/degree name) in the ..................... …..(Faculty
name) under my supervision.
The work reported in the present research report entitled “Export
Performance of India after COVID-19 ” has been done by the candidate
himself/herself, and has not been submitted elsewhere.

Date: (Supervisor Signature)

(Full Name)

Forwarded & Recommended

(Signature & Name) (Signature & Name)

Head of the Department Principle/Director

 Format Candidate Declaration

I Mr. YOGESH KAUSHIK declare that work done in the present research
report entitled “Export Performance of India after COVID-19 ” has been
done thoroughly by me and not copied and taken from any other literature
related and benefit of the research in this field and has not been submitted
for any other degree.

Date: …………………………

Mr. YOGESH KAUSHIK

S /o. MR. RADHA KISHAN KAUSHIK

Roll.no 2300210070186

Enrollment No A-22112408

Class B.COM 6TH SEMESTER

01
 Contents
1. FOREWORD 03 - 04
2. ABBREVIATIONS 05
3. INTRODUCTION 06 - 09
4. CHAPTER - 1 10 - 21
5. CHAPTER - 2 22 - 31
6. CHAPTER - 3 32 - 42
7. CHAPTER - 4 43 - 49
8. CHAPTER - 5 50 - 58

9. CHAPTER - 6 59 -61

10. CHAPTER - 7 62 - 75

02
 FOREWORD
Two years might not be enough to have a full understanding of all that took place
due to the coronavirus disease (COVID-19) pandemic since 2020, especially as the
pandemic is still not over. But it is nonetheless imperative that institutions such as
ours try to find instances, such as this, to pause and reflect on all that has happened
recently – both the deep recession of 2020, and the fragile and uneven rebound the
world witnessed last year – to derive valuable lessons for the future.

This 2022 report, Impact of the COVID-19 Pandemic on Trade and Development:
Lessons Learned, attempts to provide our most comprehensive take on the
pandemic yet, using for that purpose all the analyses we have undertaken from the
beginning of this crisis. This task is not easy. COVID-19 has spread across the globe
like a domino, reaching every corner and creating disruptions unprecedented in
recent history. The pandemic has shown how interconnected we are, but also how
deep asymmetries between countries run in many different dimensions: in
mobilizing resources to deal with and recover from the crisis; offering social
protection to those most severely affected; and getting access to vaccines for the
many billions who need it and having health coverage for all.

It is hard to take stock of all that has happened, both for good and for bad. But it is
important to remember both, however difficult the nuance. Because this is a
complex crisis – systemic, disruptive, transformational – and only in understanding
this complexity will we find the key to provide better responses in the future.

The world has suffered severe setbacks with the pandemic. In addition to the human
loss and suffering and difficulties in maintaining decent livelihoods, some of the
hard-won gains in gender inequality and access to education have been lost.

Many of us have called for urgently addressing these asymmetries to avoid a lost
decade for developing countries and maintaining a path to achieve the Sustainable
Development Goals. The call for greater resilience has been in every policy
discussion. While we have seen areas with remarkable resilience, the problem is
that it is only for some and threatens to leave many behind. The big question is if
this health and economic crisis of the century has been enough to provoke real
change. The jury is still out – many initiatives and policy recommendations have
been aired, but more political will is needed to take them to harbour.

03
From the very first moments of the pandemic, UNCTAD has mobilized its resources
to support member States with data and analysis, a platform to discuss impacts and
solutions and projects to help deal with the crisis. We adapted our cooperation tools
as quickly as possible to meet the evolving needs. And we have been part of the
response of the whole United Nations system to the COVID-19 crisis.

Today, as the major health risks of COVID-19 seem to be receding and a major cost-
of-living crisis hits the global economy, it is important to look back at the COVID-19
crisis and learn from it to be better prepared for the future. With this report, we
offer lessons learned in our core areas of work, and provide answers to questions on
trade, finance, digitalization, global value chains, the role of the State and
international cooperation that have been prominent in policy discussions during the
pandemic. It is our hope that these lessons can provide a guide to a future that is
more resilient, inclusive, and sustainable. This is needed now more than ever.

04
 ABBREVIATIONS

COVID-19 coronavirus disease

GDP gross domestic product

ICT information and communications technology

ILO International Labour Organization

IMF International Monetary Fund

OECD Organisation for Economic Co-operation and Development

UNCTAD United Nations Conference on Trade and Development

WHO World Health Organization

WTO World Trade Organization

05
 INTRODUCTION
The coronavirus disease (COVID-19) no longer dominates the news. Other crises and
their devastating consequences are capturing the world’s attention. However,
COVID-19 has been the health and economic crisis of a century, generating severe
setbacks and disruptions.

Since the outbreak of the pandemic, more than 6.2 million deaths due to COVID-19
were reported to the World Health Organization (WHO). Yet the full death toll is
likely much higher, as records since then show excess mortality to have been
unusually high (WHO, 2022). In 2020, for the first time in the twenty-first century,
global poverty increased. An estimated 77 million more people were living in
extreme poverty in 2021, compared with 2019 (United Nations, Inter-Agency Task
Force on Financing for Development, 2022). According to the Food and Agriculture
Organization of the United Nations et al. (2021), in 2020, up to an additional
161 million people went hungry compared with the previous year.

Beyond the human suffering, the COVID-19 pandemic triggered disruptions in

almost every sphere of life. Schools and factories closed or suffered a great deal of
disruptions, many essential goods came to be in short supply, and public and social
life ground to a near halt. Wearing masks and social distancing became the norm. In
April 2020, half of the world’s population was in lockdown. For the environment, the
lockdowns created a short reprieve and precious breathing space.

The disruptions resulted in millions of jobs being slashed and deprived people of
their means for decent livelihoods. The impact was highly uneven with a
disproportionate impact on those who are less protected in the labour market, often
migrants and women (United Nations, 2020). In juggling care responsibilities, a
higher share of women than men dropped out of the labour market altogether,
compromising hard-won development gains and prospects for women’s
empowerment and gender equality (International Labour Organization (ILO), 2021).
While the job situation has started to improve, the recovery remains volatile, and
global working hours were still 3.8 per cent below pre-pandemic levels in the first
quarter of 2022 (ILO, 2022).

06
The COVID-19 crisis spread across the globe at lightning speed owing to the
interconnectedness of today’s societies and economies. The immense disruptions in
trade and investment, especially at the beginning of the crisis, have been clear
evidence of this. While both trade and investment recovered strongly, the recovery
was uneven across countries and sectors. The digital economy emerged stronger on
the back of social distancing measures, but also created deeper divides. The severity
of the pandemic’s impacts was enabled by the fertile ground of inequalities that
have been present for many years. To avoid similar crises in the future and promote
a more inclusive and sustainable world, calls for strengthening resilience were made
at all levels.

Unprecedented measures were taken at the national and international levels to

combat the crisis. After decades of retrenchment, the pandemic brought the State
back into force as the main actor of economic policy and as the key institution to
face the challenges. The State was central to implementing policies to support
people and businesses and foster a recovery that is more resilient, inclusive and
sustainable. Government support and funding enabled the development and
distribution of vaccines against COVID-19 at an unprecedented rate. But access to
vaccines across countries has been and remains highly uneven. The international
community expressed broad agreement that, to overcome the crisis, international
cooperation and solidarity were needed, most notably for access to vaccines.

The global economy has started to recover from the COVID-19 crisis. Economic
growth bounced back with trade and investment reaching higher levels in 2021 than
prior to the pandemic. The world economy grew 5.6 per cent in 2021, the fastest in
nearly 50 years (UNCTAD, 2022a).

But the global economy entered 2022 on a “two-speed” recovery path, with
developing countries much less able to recover from the effects of the pandemic
and with much greater vulnerability to external shocks (UNCTAD, 2022a). For
example, sub-Saharan economies grew, on average, only 3.2 per cent while the
economy of the United States of America expanded 5.7 per cent in 2021. The
diverging paths were driven by the asymmetry between developed and developing
countries in policy space, namely, the response capacity in terms of macroeconomic,
social and productive policies. Also, the fragilities and asymmetries apparent prior to
the pandemic raise questions about the recovery’s pace and sustainability.

UNCTAD forecasts that uneven growth trends will continue in 2022 and beyond.
Several advanced economies already surpassed their pre-pandemic levels of output,
while many developing countries may need several years. On current trends, many
developing countries are facing a lost decade (UNCTAD, 2020a; United Nations,
Inter-Agency Task Force on Financing for Development, 2022).
07
COVID-19 is still not over but most countries have removed measures, as the
perception of the health risk of the virus has changed, particularly for vaccinated
populations. Yet, there are rising numbers of cases and the possibility of new waves.

While the pandemic dominated the news for two years, today, it has largely
disappeared from the headlines. The world’s attention has shifted, particularly to
the war in Ukraine. With numerous detrimental effects, global growth has already
slowed down, and many developing countries are losing ground to advanced
countries. Rising geopolitical tensions and deepening economic uncertainty are
further increasing developing countries’ vulnerability to shocks.

In the face of exposure to multiple crises, the financial requirements of developing

countries for the next few years are much greater than their ability to pay. To
combat the COVID-19 crisis alone, it was estimated that developing countries
needed $2.5 trillion (Georgieva, 2020). The recent increase in food and energy prices
has already caused a strain on the developing world. Fiscal and monetary tightening
in developed countries will further stymie growth in poorer parts of the world and
undermine their long-term development and achievement of the 2030 Agenda for
Sustainable Development. And in many countries, there is a risk of shifting policy
priorities away from a green transition and the Paris Agreement on climate change.

Overlaps in the unfolding of new crises does not mean that COVID-19-related
challenges in developing countries have vanished. It means, rather, that additional
challenges have emerged and that those related to COVID-19 will receive less
attention and fewer resources.

This report aims at documenting and assessing shifts that the COVID-19 crisis has
triggered in economies, societies and cooperation in relation to core areas of
UNCTAD work, that is, the integrated treatment of trade and development and
interrelated issues in the areas of finance, technology, investment and sustainable
development. In the report, the lessons learned from this crisis are provided, as are
policy recommendations on what is needed to promote a resilient, inclusive and
sustainable recovery. The aim is to provide lessons learned with a fresh look and
without judgement, as an input for dealing better with future challenges.

For this purpose, in the report, data will be provided on the impact of the COVID-19
crisis and answers will be given to selected key questions that have been central in
policy discussions on the recovery. As such, the report can help developing countries
to place their specific challenges in dealing with the COVID-19 crisis more
prominently on the agenda of the international community, which are now being
compounded and overshadowed by the effects of the recent crises.

08
The reference period used in the report is from January 2020 to February/March
2022, that is, the time frame from the outbreak of COVID-19 to the time when many
countries removed measures.

The report is organized as follows:

• Chapter 1. Presentation of trade and investment trends and analysis to

inform on where the global economy stands with respect to recovery, pre-
COVID-19 levels, whether new trajectories are observed and if COVID-19 is
considered more than a slump.

• Chapter 2. Discussion on global value chains, and to which extent there is

evidence for diversifying and reshoring as announced by many policymakers
during the pandemic, and on how resilience of supply chains can be
strengthened, with special attention paid to vaccine supply chains, which
have been a key concern.

• Chapter 3. Documenting of trends in digitalization and focus on the

implications of accelerated digitalization on inclusive development, as well as
exploration of what needs to be done to leverage digital opportunities in the
post-pandemic recovery and beyond.

• Chapter 4. Discussion on the development finance landscape during the

pandemic, documenting challenges for mobilizing finance and investment,
dealing with spiralling debt and examining commitments of the international
community.

• Chapter 5. Focus on the implications of the crisis on the role of the State
and the need for international cooperation for the recovery from the COVID-
19 crisis, arguing that the crisis increased the importance of governance, both
at the national and international levels.

09
 CHAPTER – 1
TRADE AND INVESTMENT TRENDS DURING THE PANDEMIC

Mitigation measures implemented during the COVID-19 pandemic have increased

various types of transaction costs in the global economy, resulting in different
economic patterns across countries and geographic areas. The main effects of the
pandemic on trade and investment flows, as well as on commodity prices and trade
logistics, are summarized in this chapter. Trends in international trade during the
pandemic serve to illustrate the phases of the economic downturn and recovery
processes. They also serve to provide information on economic resilience in various
economies. Investment flows during the pandemic are informative with regard to
the rise of economic uncertainty and related analysis is important because
international investment flows are vital to the economies of many developing
countries. The evolution of commodity prices during the pandemic has had
implications for both economies dependent on commodity exports and for many
poor countries that are net importers of food and fuels. Finally, the dynamics of
trade logistics show the extent to which trade routes have been disrupted in the last
two years.

1.1 Trade
During the last two years, global trade has been greatly influenced by the COVID-19
pandemic (UNCTAD, 2021a). The effects of the economic downturn on global trade
have been noteworthy due to their rapidity and intensity, with regard to both the
initial decline and the rebound (figure 1.1). In comparison with the recent crisis, the
decline in global trade in 2020 was close to that during the global financial crisis of
2008/09 and substantially worse than that during the recession in 2015. This severe
downturn was the result of international trade being negatively affected by not only
the generalized decline in global demand but also enhanced cross-border
restrictions and port closures and other logistical disruptions. However, the initial
expectations of a double-digit contraction in global trade proved to be overly
pessimistic, as global trade had already begun to recover in the second half of 2020.
Overall, global trade declined by about $2.5 trillion in 2020 (or by about 9 per cent
compared with the level in 2019). According to UNCTAD data, as economic
conditions improved in 2021, the value of global trade rebounded strongly, reaching
a record high of about $28.5 trillion, equivalent to an increase of about 13 per cent
compared with pre-pandemic levels.

10
Aggregate trade statistics mask considerable differences in the effects of the
pandemic on trade across economic sectors, within both goods and services.
Overall, a large part of the effects on international trade flows have depended on
changes in patterns of demand. Due to lockdown measures, demand declined in
most sectors in the first half of 2020. However, trade in essential products such as
foodstuffs was significantly more resilient. Moreover, trade in goods essential to
mitigating the effects of the pandemic increased, including pharmaceuticals, medical
devices and personal protective equipment. In 2020, trade was also substantially
more resilient in the categories of products for which demand increased due to
lockdown measures, such as home office and fitness equipment. Successful
mitigation and adaptation measures and the availability of vaccines led to a
resumption in global demand in 2021. By the first half of 2021, the value of
international trade was already substantially higher than pre pandemic levels in all
sectors, except energy products. Trade growth continued to be strong in all sectors
in the second half of 2021 .

Lockdown measures and restrictions on movement had a significant effect on trade

in services. As with trade in goods, patterns of trade in services differed widely
across the various sectors. Travel was the most affected, as the tourism industry was
brought to a halt during most of the pandemic period (UNCTAD, 2021b). Overall, the
value of trade in the travel sector declined by more than 50 per cent during the
pandemic and remained substantially below pre-pandemic averages in both 2020
and 2021 (see box). Trade also contracted in the transport sector, but to a lesser
extent. Transport recovered in the second half of 2021, due to the resumption in
demand for air travel and an increase in volumes of air freight. In contrast, lockdown
and social distancing measures resulted in an increase in demand for information
and communications technology (ICT), electronic commerce (e-commerce) and
telecommunications services, and trade in these sectors therefore expanded during
the course of the pandemic .

Impact of the pandemic on the tourism sector

During the pandemic, lockdown and quarantine measures and restrictions on
mobility, along with the decision of many consumers to limit international travel,
resulted in the sharp contraction of cross-border tourism. The number of
international tourist arrivals declined by 73 per cent in 2020, compared with in
2019, with some developing countries recording declines of up to 90 per cent. In
2021, tourist arrivals remained at about 70 per cent below pre-pandemic levels .

11
In 2021, the weak recovery in the tourism sector was unevenly distributed across
regions due to varying vaccination rates and levels of mobility restrictions and
traveller confidence. Overall, a relatively greater recovery in tourism was seen in the
Americas and Europe, although both recorded arrivals of 63 per cent below pre-
pandemic levels. International tourism is expected to continue its gradual recovery
in 2022. However, a high degree of uncertainty, including with regard to pandemic-
related restrictions in China and the recent crisis, will continue to negatively weigh
on international tourism.

The losses due to low levels of tourist arrivals have led to substantial negative
spillovers with regard to not only travel and accommodation but also upstream
industries such as those related to food, beverages, handicrafts and recreational
activities. Taking into account the impacts on these closely linked sectors, the drop
in international arrivals caused an estimated loss of about $2.4 trillion in global gross
domestic product (GDP) in 2020 compared with the level in 2019. Losses in 2021 are
estimated at about $1.8 trillion, compared with the level in 2019. For many small
economies, some of which depend on tourism for over 50 per cent of GDP, the
implications of the pandemic have been particularly significant.

The effect of the pandemic on trade has been truly global, yet countries have been
affected to varying degrees. At an aggregate level, during the pandemic, trade
trends were similar in the least developed countries, developing countries and
developed countries. However, aggregate-level patterns mask substantial
differences at the regional and national levels. In general, economies in East Asia
were the first to experience declines in trade and the first to recover. In contrast, in
developing economies in the rest of Asia, the effects were particularly detrimental
to trade, with the value of exports declining by more than 50 per cent in 2020.
Pandemic-related disruptions also resulted in a sharp decline in exports from Africa
and Latin America in 2020, aggravated by a decline in commodity prices. Among
country groupings, in 2020, the trade downturn in small island developing States
was relatively more pronounced. The value of trade recovered in all regions and
country groupings, except small island developing States, reaching, in 2021, levels
substantially above pre-pandemic averages . The trade of countries in Africa has
remained close to 2019 levels.

The varied impact of the pandemic on international trade is also seen in country
groupings based on GDP per capita. In 2020, export levels fell at a similar rate across
most countries, regardless of GDP per capita, yet exports from poorer countries
(first and second deciles) rebounded considerably less well in 2021. Among
countries in the first decile, export levels remained at about the same as in 2019.
This trend suggests a decline in the export competitiveness of the poorest countries
during the pandemic .

12
An important outcome of the pandemic is that it has reinforced the position of
China as a leader in global manufacturing exports. Export levels in China recovered
more quickly than those in most other countries. By mid-2020, exports from China
were already above pre pandemic levels and have further increased since. The
export growth was largely driven by successful mitigation strategies at the start of
the pandemic, which allowed for a reopening of supply chains ahead of other
countries and an orientation of manufacturing capacity towards the goods for which
global demand was surging. In consequence, the global market share of China rose
considerably during the pandemic, shifting upward by more than 2 percentage
points from pre-pandemic levels (figure 1.6). The pandemic also served to increase
the importance of China as a global importer, but to a lesser extent.

Intraregional merchandise trade was more resilient during the pandemic, on

average, declining less than global average trade in 2020 and increasing more than
global average trade in 2021. However, such resilience is largely due to trade among
economies in East Asia, the growth rate of which outperformed that of East Asia
interregional trade by about 8 percentage points in 2020 and by about 12
percentage points in 2021 (figure 1.7). In contrast, in Latin America and the
Caribbean, intraregional trade declined more substantially than interregional trade
and was about 15 percentage points lower than interregional growth rates in both
2020 and 2021. This trend is consistent with the fragmentation of regional
integration efforts in Latin America and the increasing focus of many economies on
commodity exports and extraregional trade, particularly with China and the United
States. For example, there is little trade-related interdependence between the two
largest economies in the region, namely Brazil and Mexico (Economic Commission
for Latin America and the Caribbean, 2021).

1.1.1 Trade policy and trade resilience

Trade policy has been an important instrument in Government responses related to
mitigating the health-related and economic effects of the pandemic (figure 1.8). For
national Governments, one of the most pressing challenges in the initial months of
the pandemic was to secure the availability of pharmaceuticals, critical medical
devices and personal protective equipment amid the increasing global demand for
such products. Concerns were also raised about the availability of other essential
products, such as foodstuffs. In this context, the use of trade policies quickly
increased, as Governments implemented a combination of export controls and
import liberalization measures. Trade policy measures were also implemented to
further regulate or prohibit the import of products that might act as carriers of the
coronavirus, such as used clothing and wild animal products. The increase in export
restrictions resulted in numerous concerns, particularly in countries that relied on
foreign trade to access critical and essential products.

13
According to UNCTAD data, in January–March 2022, countries used about 450 trade
policy measures. Some of these measures consisted of tariff exemptions or
reductions aimed at lowering domestic prices of essential products, yet the majority
of these policy interventions were in the form of non-tariff measures. Almost two
thirds of non-tariff measures were trade restricting, such as export bans and
additional licencing requirements. Trade-facilitating non tariff measures included
measures to accelerate customs clearance, lower the number of restrictions and
simplify procedures for importing critical products. Both developing and developed
countries made extensive use of non-tariff measures to facilitate the availability of
products in high demand during the pandemic. Notably, most non-tariff measures
were put in place at the onset of the pandemic, particularly in March and April 2020.
As the emergency subsided and the number of shortages of critical products
declined, the number of newly imposed trade measures dropped significantly.

Trade policy had important effects on trade resilience during the pandemic. Low
trade costs and high levels of economic integration played important roles in
increasing the resilience of international trade. One indication of such dynamics is
that trade subject to deep agreements (i.e. agreements with an expanded scope,
beyond tariffs concessions) was substantially more resilient during the trade
downturn in 2020. On average, trade subject to deep trade agreements declined by
4 percentage points less than global averages (figure 1.9). A possible reason is that
trade agreements with a scope beyond mutual market access concessions often
reduce the uncertainty of cross-border transactions because they provide for more
stringent policy commitments, a more developed legal framework and improved
regulatory convergence.

1.2 Investment
The pandemic had a significant impact on foreign direct investment, affecting
investment in all regions and industries. Foreign direct investment declined steeply
at the start of the pandemic, amounting to less than $1 trillion in 2020, yet there has
been a V-shaped recovery worldwide (UNCTAD, 2022b). In 2021, global foreign
direct investment flows were $1.58 trillion, an increase of 64 per cent compared
with in 2020. The recovery was largely accounted for by steep increases in
developed countries .

14
In 2021, foreign direct investment flows to developed countries more than doubled,
to $746 billion, driven by strong cross-border mergers and acquisitions growth, as
well as by announced international project finance deals. In developing economies,
foreign direct investment increased by 30 per cent, to $837 billion. This increase was
mainly the result of strong growth performance in Asia and Latin America and the
Caribbean. Developing countries account for the majority of global flows, at just
above 50 per cent. Foreign direct investment f lows continue to be an important
source of external finance for developing economies, together with other cross-
border capital flows, which also saw a recovery in 2021. Much of the rebound in
foreign direct investment in 2021 was made up of cross-border mergers and
acquisitions, reaching $728 billion, an increase of 53 per cent, driven by a strong
recovery in North America. In the services sector, cross-border mergers and
acquisitions doubled to $461 billion, one of the highest levels ever recorded. Deals
targeting manufacturing firms rose slightly, by 5 per cent, to $239 billion.

After a fall in value in 2020, the value of mergers and acquisitions transactions in the
pharmaceuticals industry rose by 31 per cent, to $73 billion, and the number of
deals rose by 6 per cent, reaching 223, the highest number ever recorded. The
largest deal in 2020 was in the pharmaceuticals industry, namely, the acquisition of
Alexion Pharmaceuticals for $39 billion by Astra Zeneca. The fast-growing global
demand for digital infrastructure and services led to a significant increase in
greenfield foreign direct investment project activity in the ICT industry, which rose
by more than 28 per cent, to $85 billion in 2020 and $104 billion in 2021. Major
project announcements in this industry included an investment of $2.8 billion by
Amazon in ICT infrastructure in India and an investment of $1.8 billion by Alphabet
in Poland.

The number of announced greenfield investment projects in 2021 rose by 11 per

cent, and the value rose by 15 per cent, to $659 billion (table 1.1). Certain sectors,
including electronics and electrical equipment, construction and pharmaceuticals,
had more robust growth. The impact of the pandemic and associated lockdown and
quarantine measures might have negatively impacted investor confidence and
delayed strategic investment decisions by multinational enterprises. Announced
greenfield projects targeting the primary sector, mainly in extractive industries,
remained below the pre-pandemic level. At $13 billion, the aggregate value of
announced greenfield projects represented less than 2 per cent of the total,
compared with 24 per cent in 2003, 13 per cent in 2009 and 7 per cent in 2016. The
long-term decline in primary sector projects is the result of continued low levels of
international investment in agriculture and a shift from greenfield projects by
individual investors to international project finance investments that allow for risk-
sharing among multiple investors.

15
The number of projects in manufacturing rose by 8 per cent, representing a modest
initial recovery after a decline in investment activity by more than one third in 2020,
and leaving manufacturing project numbers at about a quarter below the average of
the last 10 years.

In 2021, strong financial markets and expansionary monetary policies in many

countries led to robust growth in international project finance, by 146 per cent. In
the last several years, investment in renewable energy has been the main engine of
growth in international project f inance. Renewables are an area of focus in many
countries, partly in aiming to achieve the Sustainable Development Goals and partly
as a response to the present oil and gas crisis. Such investments make up more than
half the annual number of projects, with six projects worth a total of more than $10
billion (table 1.2). The largest project is a construction investment in Australia, at
$74 billion, involving the creation of an energy hub of 50 gigawatts over 15,000
square km, aimed at converting wind and solar power into fuel, sponsored by
Mining Green Energy, Australia; CWP Europe, Luxembourg; and the Intercontinental
Energy Corporation, United States.

In 2022, the global environment for international business and cross-border

investment has changed significantly with the onset of the war in Ukraine, which
began while the world was still dealing with the impacts of the pandemic. Investor
uncertainty and risk aversion could place significant downward pressure on global
foreign direct investment in 2022. Early indicators reveal a cause for concern with
regard to the foreign direct investment outlook; related project activity in the first
months of 2022 showed investor uncertainty and risk aversion. According to
preliminary data, the number of greenfield project announcements in the first
quarter of 2022 was 21 per cent less than the quarterly average in 2021. Cross-
border mergers and acquisitions activity was 13 per cent below the average and
international project finance deals were down by 4 per cent. However, in terms of
value, cross-border mergers and acquisitions were up by 59 per cent compared with
in 2021. The value of announced international project finance deals was 37 per cent
below the record level in 2021 but remained at a high level compared with the pre-
pandemic period. Overall, UNCTAD forecasts that the growth momentum of 2021
cannot be sustained and that global foreign direct investment flows in 2022 will
likely move on a downward trajectory or, at best, remain flat. This projection takes
into account various downward pressures and potential stabilizing factors and
considers the composition of the value of $1.6 trillion in 2021 that, for several major
recipient regions (particularly Europe and North America) did not represent
historically high levels. However, the projection of relatively stable flows in value
terms may be optimistic with regard to actual new project activity, which could be
more negatively affected by investor uncertainty.

16
1.2.1 Policy measures affecting foreign investment

The trend towards implementing more regulatory or restrictive investment policy

measures accelerated during the pandemic (UNCTAD, 2021c). In 2020, 67
economies introduced an aggregate of 152 policy measures affecting foreign
investment, an increase of approximately 42 per cent compared with in 2019. The
number of measures introducing regulations or restrictions more than doubled to
50, as several countries adopted or reinforced screening regimes for foreign
investment, including in response to the pandemic. Conversely, the total number of
measures that liberalized, promoted or facilitated investment remained relatively
stable. Although developed countries adopted the majority of these measures,
several developing countries and emerging economies also began to strengthen
foreign direct investment review mechanisms. This increase in regulatory or
restrictive policy measures was not only a response to an extraordinary crisis but
also a continuation of a policy trend in place since the global financial crisis of
2008/09. Most of the investment measures implemented in developing countries
were aimed at liberalizing, promoting or facilitating investment, with only a few
imposing new regulations or restrictions. In contrast, the majority of the measures
introduced in developed countries introduced new or reinforced existing
regulations. All of these measures related directly or indirectly to national security
concerns about foreign ownership of critical infrastructure, core technologies or
other sensitive domestic assets. Often, the measures were aimed at protecting
sensitive domestic businesses against foreign acquisition during the pandemic.
Moreover, about 25 countries, nearly all developed countries, as well as the
European Union, adopted or reinforced screening regimes for foreign investment,
bringing the total number of countries conducting foreign direct investment
screening for national security reasons to 34. The adoption or reinforcement of such
screening mechanisms may have a cooling effect on investment flows to sectors
potentially subject to screening, as foreign companies may decide to abandon
investment plans or not undertake business opportunities in industries subject to
scrutiny.

The pandemic led to significant challenges with regard to national health systems
and policies. The outbreak of the pandemic prompted a significant increase in
foreign investment policy measures in the health sector. On the basis of a survey of
70 economies conducted by UNCTAD, none of the economies surveyed had
introduced new foreign direct investment entry restrictions in the health sector or
lifted existing restrictions since the start of the pandemic. However, almost one
third of these economies had introduced new or reinforced existing screening
procedures for foreign investment in the health sector. On the other hand, at least
six economies had introduced new investment incentives in the sector in response

17
to the pandemic, including incentives to foster digital medical technologies,
particularly telemedicine and e-health applications, and incentives for the
manufacturing of medical equipment and supplies (e.g. personal protective
equipment), as well as grants and loans for medical and pharmaceutical research
related to the pandemic.

International investment agreements can help in promoting, facilitating and

protecting investment in health, but might also create frictions with policy
responses made by Governments to address the economic impact of the pandemic.
This highlights the need to safeguard sufficient regulatory space in international
investment agreements to protect public health and to minimize the risk of
investor–State dispute settlement. The pandemic has served to highlight
vulnerabilities in global supply chains and productive capacities in health, which has
prompted Governments to consider needed actions for post-pandemic recovery and
resilience. The pandemic led some countries to increase oversight of investment in
the health sector and also led many Governments to increase efforts to encourage
investment in the industry. Internationally, such efforts are complemented by
market access and national treatment commitments related to health services
under the World Trade Organization (WTO) framework and in some free trade
agreements, as well as by treaty regimes for the protection of investment and
intellectual property rights. However, an open investment policy regime alone will
not suffice to attract the levels of investment required to achieve Sustainable
Development Goal 3 on ensuring healthy lives and promoting well-being for all at all
ages by 2030. Governments will also need to assess the segments to prioritize and
how to build a tailored support ecosystem through coherent policies, efficient
regulatory institutions and infrastructure and the enhancement of relevant skills and
technology.

1.3 Commodity prices

The pandemic contributed significantly to both demand and supply disruptions in
commodity markets, resulting in high price volatility across various commodities. In
the last two years, food prices have generally followed the same dynamic as
international trade. In January–September 2020, the UNCTAD monthly food index
declined by 4 per cent as the prices of most commodities in the group fell due to a
combination of abundant supply in markets and decline in demand . From the last
quarter of 2020, through 2021, to February 2022, the food index trended upwards,
with short-term fluctuations. This recovery in food markets came later than recovery
in other commodities such as fuels and minerals, ores and non-precious metals. The
rise in food prices was driven by a rebound in demand and rising input costs caused
by a rise in oil and gas prices, with the latter explaining the delayed effect (United
Nations, 2022) .
18
Food imports absorb a large amount of export revenue in developing countries; a
rise in basic food prices thus increases import bills, potentially limiting access to
nutritious food. Rising food prices in 2021 contributed to vulnerability and food
insecurity in many low-income developing countries. The war in Ukraine is further
impacting food prices globally, aggravating food insecurity. In 2020, small island
developing States and the least developed countries spent approximately 42 and 23
per cent, respectively, of the total value of merchandise exports on food imports
(figure 1.12). Some estimates indicate that, in 2021, food import bills in developing
regions increased by 20 per cent compared with in 2020, largely due to higher food
commodity prices and a threefold increase in freight costs (United Nations, 2021a ).
This is likely to further deepen food insecurity in developing regions. In 2020,
between 720 million and 811 million people worldwide were undernourished, an
increase of at least 118 million compared with in 2019 (Food and Agriculture
Organization of the United Nations et al., 2021).

Fuel price trends were characterized by a steep decline at the start of the pandemic
and a recovery in 2021. In January–April 2020, the UNCTAD fuels index declined by
56 per cent, reaching its lowest level in 18 years. This decline was largely due to a
collapse in oil prices owing to oversupply in the market amid a slump in demand
caused by the contraction of the global economy. In May–December 2020, the index
recovered, rising by 92 per cent due to recovering oil prices driven by a rebound in
demand as lockdown restrictions eased, combined with major reductions in crude
oil production by oil-exporting countries (International Energy Agency, 2020). In
January 2021–March 2022, the index rose again, by 95 per cent, driven by robust
demand growth due to continued economic recovery after 2020, unexpected supply
disruptions leading to tighter markets and declining stocks (International Energy
Agency, 2022).

Metal and minerals prices were initially relatively more stable in the first half of
2020, followed by a strong upward trend during the rest of the pandemic period. In
January–April 2020, the UNCTAD minerals, ores and non-precious metals index
declined by 12 per cent, largely due to the falling prices of copper and iron ores. The
decline in prices was due in part to low levels of demand at the start of the
pandemic. In May 2020–February 2022, the index rose by 82 per cent, due to rising
prices of iron ores and other commodities making up the group. In January–August
2020, the UNCTAD precious metals index rose by 27 per cent, due to rising gold
prices, which were driven by uncertainty at the start of the pandemic, prompting
investment in safe-haven assets (Sappor et al., 2020). In September 2020–February
2022, the index followed a volatile path, falling by 3 per cent. The decline reflected
volatile gold prices due in part to faltering demand for gold as a safe-haven asset.

19
The fluctuations in commodity prices in 2020 and 2021 have led to substantial
macroeconomic challenges. On the one hand, increasing volatility has contributed to
large swings in external balances, particularly in low-income countries. On the other
hand, the rise commodity prices in 2021 raised concerns about food insecurity and
considerably increased fuel import bills in net importing countries. This rise also
contributed to fuelling inflation in both developed and developing countries.
Persistently high commodity prices might result in a shift of resources from other
sectors and thereby lead to less diversification in commodity-exporting countries.

1.4 Trade logistics

Trade logistics are critical for smooth global trade, particularly with regard to
maritime transport, as over 80 per cent of global trade in goods is carried by sea.
The pandemic led to severe disruptions in global logistics and maritime trade due to
port terminal closures and transportation delays. In 2020, the volume of
international maritime trade contracted by 3.8 per cent (UNCTAD, 2021d).
Moreover, global port calls declined by 6.2 per cent, with a 12.5 per cent decline in
small island developing States, reflecting a redeployment of ships towards more
lucrative markets (table 1.3). These disruptions were of significant concern, as
maritime transport played a critical role in enabling access to essential goods. To
facilitate the global availability of critical goods, Governments were urged to keep
maritime trade moving through open ports while implementing measures to protect
seafarers and other transport workers.

Fuelled by increasing global demand, shipping recovered more rapidly than

expected. By late 2020, shipping markets were on a recovery path, except oil. In
2021, maritime shipments expanded by about 3.3 per cent and, in 2022, the
projected growth is by 2.6 per cent (Clarksons Research, 2022). The swift recovery of
trade in 2021 led to exacerbated supply chain pressures and put a strain on the
reliability of shipping services. This was reflected in soaring freight rates and
surcharges, port congestions, increased delays and equipment shortages,
particularly in the containerized trade segment .

UNCTAD data show that, as a result, in 2019–2021, global port waiting times for
container ships increased by about 16 per cent. Faced with a shortage of capacity,
carriers assigned vessels and services to more lucrative and larger markets, leaving
out ports not located on the main East–West container trade routes or considered
of less importance due to smaller business sizes. The number of connected ports has
thus declined since 2019, reversing previous trends.

20
Continuing disruptions in logistics and soaring freight rates are raising concerns
about inflation. According to an UNCTAD simulation, in 2023, a sustained surge in
freight rates could lead to a rise in global import prices by 12 per cent and a
corresponding rise in global consumer prices by 1.6 per cent. Small island developing
States would be the most negatively affected, with an estimated rise in consumer
prices by 8.1 per cent (figure 1.14). The prices of two types of products are most
strongly affected by higher freight rates, namely low-value, high volume goods with
significant transport costs compared with their low values (e.g. bulky furniture); and
products with deep supply chains, that is, with raw materials, unfinished goods and
components shipped several times as the products are assembled in different
locations. Mitigating the surge in shipping costs requires the implementation of
trade facilitation and digitalization measures, as well as tracking and tracing;
mainstreaming predictive analytics and forecasting; and promoting competition in
maritime transport and logistics. In general, improving understanding of the
structural determinants of transport costs and how to alleviate these is equally
important in order to reduce inflation (UNCTAD, 2021d) .

The pandemic underscored the critical role of seafarers in making or breaking the
resilience of maritime transportation. As seafarers worldwide continued to be
severely affected by the pandemic, in February 2022, ILO, the International
Maritime Organization, UNCTAD and WHO issued a joint statement urging
Governments, national and local authorities and all relevant stakeholders to take 10
critical actions in support of the safety of seafarers and facilitating their work, such
as with regard to vaccinations and designating seafarers as essential workers to
facilitate maritime crew changes and safe movement across borders, as well as
recognizing relevant documentation for this purpose (ILO et al., 2022).

The unprecedented disruptions associated with the pandemic are leading to a

number of legal issues affecting traders worldwide. In all cases in which
performance is disrupted, delayed or has become impossible, legal consequences
and claims arise, and this is increasing the need for dispute resolution and giving rise
to a range of jurisdictional issues in a globalized context. The legal implications of
the pandemic for the closely interconnected commercial contracts involved need to
be better understood, to reduce the need for costly litigation and help inform
commercial contracting practices in the future. UNCTAD research and analysis has
highlighted the key legal implications for different types of commercial contracts
and the need for commercial risk allocation through the use of suitably drafted
contractual clauses (UNCTAD, 2021e; UNCTAD, 2021f; UNCTAD, 2021g).

21
 CHAPTER – 2
GLOBAL VALUE CHAINS:
CHALLENGES AND RESILIENCE DURING THE PANDEMIC

2.1 Global value chains

At the onset of the pandemic, factories in many parts of the world stood idle due to
lockdown measures and staffing shortages, while shipping operations slowed
considerably due to enhanced cross-border restrictions, port closures and other
logistical disruptions. The global production model based on distant suppliers
operating under a just-in-time delivery model appeared inadequate in the face of
the disruptions due to the pandemic. The shortage of material to deal with the
pandemic, such as face masks, ventilators and other necessary equipment,
contributed to recognition of the need to revisit a production and distribution model
that was over-reliant on foreign manufacturers and suppliers (Gereffi, 2020).
However, as the pandemic spread, global value chain operations adapted to the new
challenges. Value chains with production processes based in East Asia recovered
relatively quickly, to meet the increased global demand for medical products and
home-office equipment (Brenton et al., 2022).

As global trade rebounded from the initial effects of the pandemic, new challenges
arose with regard to global value chains. In 2021, value chains were poorly
positioned to meet the sudden increase in demand because of a below-average
level of investment and because operations continued to face supply-related and
logistical disruptions due to recurring lockdown measures. Port congestion,
increasing shipping times and the scarcity of containers along some of the major sea
routes added to trade costs and to complications for value chain operations well
into 2021. Moreover, global semiconductor shortages significantly affected global
production, particularly in the automotives and electronics sectors. However, by the
end of 2021, as the global economy stabilized, many of the issues affecting the
operations of global value chains began to diminish (WTO, 2021a).

Despite the challenges brought on by the pandemic, the restructuring of global

production processes has been less prevalent than initially expected and has been
largely in line with long-term trends driven by technological changes (robotization,
automation and digitalization); increased protectionism and regionalization; and the
need to meet sustainable development objectives. Global efficiency and cost-
reduction strategies continue to remain the paramount objective of global firms.

22
Economies of scale, the geographical location of resources, long term investments in
production facilities and the significant investments required to build new trade and
logistics infrastructure can make meaningful alterations to current patterns of global
production costly. Much discussion has taken place on reshoring and nearshoring,
yet there is little data-based evidence to indicate systemic changes in the
arrangement of global production. On the contrary, the early success in the
economies of East Asia in mitigating the economic effects of the pandemic may have
resulted in increased reliance, in global value chains, on manufacturing production
originating from East Asia.

An indication of the persistence of offshoring practices is shown in the most recent

trade statistics of the European Union. On average, about 70 per cent of imports of
intermediate inputs for European Union manufacturing industries originate from
within the European Union, while East Asia contributes about 15 per cent. These
figures vary substantially across sectors. For example, the motor vehicle industry is
highly localized in the European Union, with about 85 per cent of trade in
intermediate inputs originating from member States. In contrast, the
communications equipment sector is significantly more reliant on offshoring, with
about 45 per cent of trade in intermediate inputs originating from member States.
The evolution of the ratio of these two statistics in 2020 and 2021 shows the
dependence of value chains in the European Union on suppliers from East Asia . This
dependence increased during the pandemic and, by the fourth quarter of 2021, was
at about 20 per cent, on average, above the pre-pandemic level in 2019 (apart from
figures for the automotives sector in the third quarter of 2020, which reflect
advance orders). This trend is observed in both sectors already reliant on suppliers
from East Asia (e.g. communications equipment) and sectors with value chains that
operate largely within the European Union (e.g. motor vehicles).

2.2 Industry participation in global value chains and reconfiguration

The pandemic influenced global value chains to a varying degree, largely depending
on supply chain configuration, as measured by length and geographical distribution,
which provides for an assessment of exposure to network reconfiguration risks
(UNCTAD, 2020b). The length is measured by the number of cross-border
intermediate production steps; and geographical distribution reflects the degree of
participation in production processes across countries. Network restructuring aimed
at resilience can be traced as a broad diagonal move from long and concentrated
configurations to short and distributed configurations (figure 2.2). Such a move is
enabled by reshoring or nearshoring (reducing exposure with regard to length) and
diversification (reducing exposure with regard to geographical distribution).

23
The most exposed sectors include value-chain–intensive industries (e.g.
automotives, electronics, machinery and equipment and textiles and apparel), which
account for about 20 per cent of greenfield investment across all industries, but
almost 50 per cent when considering manufacturing investment only. They are
typically a mainstay of industrialization strategies in developing economies and play
a larger role in international production and development than may be suggested by
their investment size. A move towards production network reconfiguration in these
industries could have important development implications.
In the cluster of industries characterized by medium-level exposure, two groups
(food and beverages; and chemicals) are characterized by long but regionally
diversified production networks. These are regional processing industries, typically
organized in regional value chains, replicating on a local scale the long and vertically
specialized global value chain model. Another group has shorter and more
concentrated global supply chains, in which operations are distributed but the bulk
of the value is shared between a few locations. This structure is consistent with
more knowledge-intensive industries, such as pharmaceuticals, and also with
services industries characterized by a few high value adding hubs and many
operational spokes. Industries with low-level exposure are either upstream
industries contingent on natural resources that cause dispersed production (e.g.
extractive and processing industries and agriculture - based industries) or lower
value added proximity services instrumental to local operations or delivery (e.g.
services industries such as transportation and logistics and retail and wholesale).
These activities typically have short value chains and value added generated by
location-specific assets. The set of value-chain–intensive industries, that is, the set
most exposed to supply chain risks, is also characterized by the highest economic
barriers to the reshoring or restructuring of production networks. All of these
industries have highly cost-efficient production networks, as also reflected by the
capital and labour intensity of typical investment projects .
Capital-intensive industries, such as automotives and electronics, leverage
economies of scale generated by concentrated and specialized production hubs that
optimize operational efficiency and lower costs. Labour-intensive industries, such as
textiles and apparel, take advantage of different wage rates between countries to
minimize costs of production. The physical relocation of fixed (tangible) assets incurs
significant costs associated with redundant production sites and financing costs
associated with the establishment of new facilities, particularly for more capital-
intensive activities. Overall, network restructuring measures to build resilience
expose multinational enterprises in value-chain–intensive industries to significant,
and potentially prohibitive, cost-related pressure. Some industries facing less
extreme cost-benefit trade-offs (e.g. industries characterized by relatively smaller
investment sizes, such as machinery and equipment) are more likely to undergo
some reconfiguration.

24
The pharmaceuticals industry may also be exposed to business and policy pressure
to relocate. Overall, most industries are unlikely to embark on a systematic and
broad-based process of network restructuring in the absence of policy pressures or
incentives in that direction.

The question of the extent to which the pandemic accelerated global value chain
reconfiguration is difficult to answer definitively, as comprehensive data is not yet
available. However, by considering evidence from greenfield investment projects, it
is possible to compare the period before the pandemic (pre-2020) with the period
during the pandemic (2020–2021) and there is no clear pattern between the two
periods. Among industries with a high-level risk exposure, in automotives, the share
of greenfield projects and the average size of investments by companies decreased;
in electronics, the share of greenfield projects increased and the average size of
investments nearly doubled. Among industries with a medium-level risk exposure, in
chemicals and pharmaceuticals, the average size of investments increased; a trend
likely due to pandemic related demand for pharmaceuticals. Among industries with
a low-level risk exposure, in transportation and logistics and extractives, the average
value of investments decreased significantly and, in extractives, the share and value
of greenfield projects nearly halved. With regard to the labour intensity of
investments, the general decline across nearly all industries (with the exception of
transportation and logistics and extractives) could signal troubling implications for
developing countries in terms of employment generation from foreign investment.

2.3 Resilience and reshoring of global value chains

The pandemic has provided valuable lessons for both Governments and companies
on how to make production networks more resilient.

Many Governments took note of the risks associated with international

dependence. Value chain operations are largely driven by the pursuit of efficiency
gains, yet policymaker objectives are generally broader. Support for national
production often took priority during the pandemic, as shown by the number of
“buy national” initiatives. The rationale for such policies is to ensure the availability
of important products while also improving employment opportunities domestically.
Reshoring can be seen as a suitable strategy for mitigating the risks associated with
over-reliance on foreign suppliers, not only in the context of a global economic
shock but also in the present situation of shifting geopolitics. Moreover, social
concerns such as with regard to employment creation increased during the
pandemic, adding arguments to the benefits of reshoring some manufacturing
industries closer to consumers (Organisation for Economic Co-operation and

25
Development (OECD), 2021b). However, reshoring may result in efficiency losses for
a firm owing to the use of less competitive suppliers, thereby lowering international
competitiveness. Governments have been increasingly looking to pair reshoring
policies with nearshoring, involving the reshaping of supply networks towards
geographically closer countries. Nearshoring could reduce efficiency losses from
reshoring, while still providing some diversification. Nearshoring could also reduce
the risks associated with an over-reliance on distant suppliers and mitigate the
effects of increasing transport costs. As trade policy has increasingly become a tool
in foreign policy, discussions have increased on “friend-shoring”, which involves the
reshaping of supply networks to include geopolitically closer countries. Trade
tensions between some of the major world economies and increasing protectionism
were already increasing uncertainty before the pandemic and new geopolitical
tensions have emerged in recent months. Friend-shoring, while resulting in
efficiency losses, could mitigate the risks associated with a possible increase in
restrictive trade policies based on economic and geopolitical considerations.
Nearshoring and friend-shoring can be supported by trade facilitation and trade
agreements seeking deeper integration among members (European Union, 2021).

On the company side, the pandemic has shown the importance of the reliability of
firms in fulfilling orders. The rebound of trade in 2021 was made possible by the fact
that many production networks showed a surprisingly high degree of resiliency and
adaptation. This outcome is partly due to fiscal support provided to firms by
Governments and partly because companies within a network have strong
incentives to support each other in times of crisis. Such business-to business support
has been instrumental in the speedier resumption of operations as conditions have
improved. Such a strategy makes sense from a business perspective, as finding new
reliable suppliers is both costly and time consuming. The disruptions due to the
pandemic also showed that large companies are generally better able to weather
economic shocks. The survival rates of firms declined during the pandemic, and
most of the affected firms were small and medium sized enterprises (Bartik et al.,
2020). Limited access to credit, as well as difficulties in securing the necessary inputs
amid the widespread supply crunch, meant that many small exporters were unable
to fulfil contract obligations. Moreover, lower levels of global demand led many
small suppliers to go out of business, as they could not easily find buyers for their
products. Overall, supply and demand shocks due to the pandemic resulted in less
well-established suppliers, as well as less competitive suppliers, being squeezed out
of international markets.

26
Despite the disruptions due to the pandemic, changes in global supply chain
operations have not manifested in the form of short-term emergency restructuring
but are likely to contribute to long-term gradual rebalancing. As new investments
are not affected by sunk costs, the business case for rebalancing is more credible
than that for restructuring. A greater focus on resilience will not fundamentally
change the way businesses make strategic choices. Location related decisions will
still be based on considerations of financial costs and benefits. However, the
rebalancing process will likely change the relative weight of the two sides of the
equation, with multinational enterprises expected to relinquish some cost efficiency
in order to secure resilience gains. A cost-benefit analysis based on business
considerations demonstrates the complexity of reconfiguring the international
production networks of multinational enterprises in response to the pandemic. In
the short term, supply-chain restructuring (i.e. reshoring, relocation and
diversification) is likely to become a reality only as a result of political pressure or
concrete policy interventions and where incentives or subsidies change the
economic equation. Any such interventions will prioritize supply chains for essential
goods and for strategic growth sectors. In the absence of policy drivers, most
multinational enterprises are likely to focus on enhancing supply chain risk
management practices that do not involve the reconfiguration of production
networks. The immediate impact on foreign direct investment patterns of a shift
towards more resilient supply chains is therefore expected to be limited. The longer-
term effects of seeking increased resilience will be more significant. Longer-term
considerations will become part of the broader transformation process already set
in motion before the pandemic, including due to trends related to technology, policy
and sustainability. With resilience considerations becoming a part of investment
drivers and determinants, it is likely that there will be a gradual rebalancing of
international production networks towards higher levels of diversification and
regionalization and, quite possibly, less use of offshoring.

Enhancing the resilience of global value chains and trade also depends on well-
functioning trade logistics. The pandemic provides several lessons in this area. The
disruptions have heightened the need for risk management and preparedness in
transport and distribution networks. Prioritizing risk management and
preparedness, devising and implementing risk management and business continuity
strategies, building strong relationships with key partners (e.g. ports, shippers and
inland transport providers) and ensuring visibility across the extended supply
network, as well as making use of digitalization, data and forecasting models to
anticipate and plan for change, are increasingly recognized as critical to ensuring
more resilient and sustainable supply chains (UNCTAD, 2021d).

27
Demand for digital and paperless solutions surged during the pandemic, as
operators and officials aimed to minimize physical contact; for example, the use of
electronic single windows can help expedite border formalities. In this regard,
UNCTAD, under a project on transport and trade connectivity in the age of
pandemics, provided technical assistance to support digital trade and transport
facilitation solutions during the pandemic. Improved coordination among agencies,
the harmonization of biosecurity procedures and greater flexibility in granting
permits, among others, enabled smoother trade-related transactions. National trade
facilitation committees helped to ensure coordinated responses by implementing
and monitoring trade facilitation reforms using digital tools such as the UNCTAD
reform tracker.

The role of technology as a crisis mitigation tool and resilience-building lever has
been widely recognized. Ports with smart features generally fared better amid the
disruptions caused by the pandemic. Those that invested in digital infrastructure and
connectivity and promoted data exchanges among port authorities, shippers and
freight forwarders navigated more smoothly through the disruptions. In this regard,
developing countries need to be supported in efforts to implement digital tools to
advance environmental sustainability, economic efficiency and resilience. In
particular, inland terminals and smaller ports require support in implementing
technology and digital tools.

The pandemic-induced strain on global logistics also underscored the importance of

fair competition and a level playing field among supply chain actors, to ensure the
fluidity and resilience of the maritime supply chain. The global logistics crisis in
2021–2022 and soaring shipping costs have led regulators to scrutinize shipping
practices. This has implications for carrier alliances, consortiums and vessel-sharing
agreements, as well as the increasing trend towards the vertical integration of
maritime transporters, to include end-to-end freight movement within their
services, in direct competition with other logistics service providers. As part of the
annual Review of Maritime Transport, UNCTAD monitors and reports on trends in
liner shipping market dynamics while leveraging its extensive statistical resources
and data on liner shipping connectivity, ship capacity deployment and the number
of services and operators servicing ports. In addition, the Intergovernmental Group
of Experts on Competition Law and Policy provides a forum for port authorities to
discuss liner shipping competition issues. UNCTAD brings together policymakers
from maritime transport competition authorities in order that they can better
understand market developments and provide the requisite regulatory oversight.

28
2.4 Vaccine value chains
Vaccine production is a complex endeavour. The development of vaccines involves
strict procedures and demanding regulatory requirements. Production requires
expensive facilities and economies of scale in order that research and development
costs may be recovered. Only a few countries produce vaccines and even fewer
countries export them. The top 10 exporting countries account for 93 per cent of
global export value and 80 per cent of global export volume (OECD, 2021b).
Moreover, many vaccine inputs are highly specialized and production is often
concentrated in a few firms in a small number of countries (Arthur, 2021). During
the pandemic, a number of pharmaceutical companies developed vaccines using
state-of-the-art techniques that could facilitate production while ensuring
effectiveness.

Overall, these vaccines were developed more quickly than previous vaccines for
other viruses. One important consideration for vaccine manufacturers was the
location of production. Pharmaceutical value chains operate according to profit-
maximizing objectives yet, during the pandemic, Government interventions greatly
influenced the choice of location, which was based on not only existing
infrastructure, facilities and know-how but also the level of f inancial support
provided by Governments to manufacturers, to produce vaccines within their
jurisdictions. Another consideration in the choice of facility location was the
limitation of vaccine exports, at least for as long as vaccines remained in short
supply; these two factors greatly influenced the initial localization of production
(Evenett et al., 2021). The initial arrangement of vaccine production during the
pandemic resulted in a high level of prioritization of access to vaccines, despite
international initiatives such as COVID-19 Vaccines Global Access (COVAX). Most
developed countries attained high vaccination rates in part due to support provided
to manufacturing companies and the capacity to pay higher prices; many developing
countries and the least developed countries were able to access vaccines only at a
later date. Over time, with the streamlining of production lines and the
establishment of multiple parallel supply chains, manufacturing companies
determined that vaccines could be efficiently and profitably produced in other
markets (Bown and Bollyky, 2021). This shows that, with the right policy support and
investment, the production of vaccines can be established in developing countries.
However, in addition to investment in vaccine production facilities, it is also crucial
to assess constraints in supply chains for the provision of goods and services related
to the manufacturing, storage, distribution and administration of vaccines (WTO,
2021b). Tariffs and non-tariff measures applied to these inputs can substantially add
to the feasibility of manufacturing and distributing vaccines in developing countries.

29
Vaccine production accelerated considerably in 2021. In the first six months of 2021,
global vaccine trade was already 26 per cent higher than in all of 2020 and trade in
related or intermediate inputs also increased, underpinning the wider
manufacturing and distribution of vaccines (OECD, 2022a). Such increases may be
positive, yet a clear pattern may be noted, namely, that vaccines are only exported
after domestic demand has been met in developed countries. With regard to
pandemic-related measures in January 2020–March 2022, the UNCTAD non-tariff
measures database shows that several vaccine-producing countries imposed export
restrictions on vaccines, mostly in the form of non-tariff measures.

An important factor in the production of vaccines is intellectual property rights.

Patents may be filed not only during the production process of a vaccine but also
during many of the development stages. For example, if clinical trial data is subject
to intellectual property rights, it may take more time for a subsequent producer to
obtain domestic approval. Intellectual property rights incentivize the innovation of
new technology yet may also hinder the production of vaccines by companies in
developing countries. Both international trade and investment agreements have
compulsory licencing provisions to override intellectual property rights in an
emergency. However, in the past two years, no company has been granted a
compulsory licence to make a coronavirus vaccine, highlighting the need to further
enhance and broaden international cooperation in dealing with emergencies.

Limited pre-existing capacity and a lack of government resources are other factors
that have constrained developing countries in the production of vaccines. In
contrast, developed countries have supported vaccine production both financially
and through advance purchases. For example, in mid-2020, the United States
announced significant support for the coordination of clinical trials and the scaling
up of manufacturing; this investment was made despite the risk of loss if a vaccine
was not approved (Bown and Bollyky, 2021; Slaoui and Hepburn, 2020). Developing
countries faced difficulties in making substantial investments, in addition to the risk
factors involved, partly also due to fiscal pressures during the pandemic caused by
reduced tax incomes and the increased costs of social safety nets.

The pandemic served to provide incentives to developing countries to establish the

local production of vaccines. It has been shown that local production can be
facilitated, despite the substantial investment required, with appropriate licencing
and intellectual property rights waivers. For example, several countries in Africa
have begun the local manufacturing of vaccines and more facilities are planned
(figure 2.3). However, vaccine distribution often represents an even more significant
challenge in developing countries, particularly in areas in which health systems are
not fully developed. Vaccines have a short shelf life and need to be properly stored

30
to maintain effectiveness. As trade infrastructure and logistics may often be of poor
quality, the deployment of vaccines from manufacturers to the population often
poses a significant barrier, particularly in reaching rural populations (WHO, 2021).

31
 CHAPTER – 3
DIGITALIZATION:
IS THE DIGITAL REVOLUTION BECOMING MORE INCLUSIVE?

The pandemic has led to a surge in digital transformation worldwide. The role of
digitalization during the pandemic is addressed in this chapter, including the
implications for inclusive development and consideration of what needs to be done
to leverage digital opportunities during the post-pandemic recovery and beyond.

3.1 The role of digitalization during the pandemic

Following the onset of the pandemic and the implementation of social distancing
measures, much of the world increasingly “went digital”. Digital tools and solutions
helped deal with the spread of the coronavirus and ensure the continuity of many
economic activities. Researchers utilized big data and artificial intelligence to detect
epidemiological patterns and accelerate research for the development of vaccines.
Smart mobile applications were developed for contact tracing and to help interrupt
the transmission of the coronavirus. At the same time, many people with access to
digital devices and connectivity tools were able to continue to work, attend school,
communicate, shop and be entertained. However, the vulnerable became even
more vulnerable.

3.1.1 Digital uptake and trade implications

During the pandemic, the use of e-commerce, which is a broad measure of the
digital economy, grew quickly. UNCTAD data show that people turned to digital
platforms to shop online, with the online retail sales share of total global retail sales
rising from 16 per cent in 2019 to 19 per cent in 2020, a level that was sustained into
2021 (figure 3.1). In seven countries (Australia, Canada, China, the Republic of
Korea, Singapore, the United States and the United Kingdom of Great Britain and
Northern Ireland), with a combined GDP accounting for around half of global GDP,
online retail sales rose from $2 trillion in 2019 to $2.9 trillion in 2021. The rapid
uptake of e-commerce was evident across regions, with consumers in emerging
economies making the greatest shift to online shopping (UNCTAD, 2022e).

32
Many small businesses had fewer digital solutions in place prior to the pandemic
and the shift to making online transactions enabled them to survive when lockdown
and social distancing measures hindered offline trade (UNCTAD, 2021k). This was
also the case for many women - owned microenterprises and small enterprises and
retail traders. There are more than 9 million formal women-owned small and
medium-sized enterprises (that is, one third of all formal small and medium-sized
enterprises are women-owned) and women globally represent 42.1 per cent of
those employed in the wholesale and retail trade sector, compared with 38.7 per
cent of total workers (ILO, 2020; International Finance Corporation, 2014).
Anecdotal evidence shows that some women traders switched to using e-commerce
when the closure of borders limited travel to neighbouring countries in order to
conduct business (UNCTAD, 2022i). Digital tools and solutions also sustained global
value chains, cross-border trade and transport networks by helping to ensure
business continuity while protecting the health of transport workers and border
agents (UNCTAD, 2021d). The increased automation of customs and the
digitalization of other regulatory procedures, for example, through the use of the
UNCTAD Automated System for Customs Data, enabled some countries to
implement the use of e-trade permits, paperless processes and the exemption of
taxes to facilitate imports of medical supplies during the pandemic (UNCTAD,
2020f). The increased use of digital technologies impacted international trade; the
share of ICT goods in merchandise imports increased from 13 per cent in 2019 to
nearly 16 per cent in 2020, the greatest annual increase since recording began in the
year 2000 (UNCTAD, 2021q). Digitalization has also contributed to the servicification
of the economy. For example, the share of services that can be digitally delivered
reached nearly 64 per cent of total services exports in 2020, up from 52 per cent in
2019 (UNCTAD, 2022g). Digitally deliverable services include ICT services and
financial, professional, sales and marketing, research and development and
education services (UNCTAD, 2022j).

3.1.2 The accentuation of digital divides

Far from all populations have been able to harness the potential of digital
opportunities. In the least developed countries, 27 per cent of people currently use
the Internet (International Telecommunication Union, 2021). In addition, in
developed countries, up to 8 in 10 Internet users shop online; this figure is less than
1 in 10 in many of the least developed countries (UNCTAD, 2021i). Differences in
digital readiness are also indicated by the level of trade in digitally deliverable
services. In 2020, the share of digitally deliverable services in total services exports
was 68 per cent in developed countries and 22 per cent in the least developed
countries (UNCTAD, 2021q). Those less prepared digitally risk falling further behind
in the fast-evolving digital economy. In this context, particular attention should be

33
given to vulnerable and disadvantaged groups. For example, gender-based digital
divides increased in some countries during the pandemic, reversing a positive trend
witnessed since 2017. In 2021, women in low-income and middle-income countries
were 16 per cent less likely than men to use mobile Internet access, a decrease by 1
percentage point compared with in 2020. With regard to smartphone ownership,
which is the most common means of accessing the Internet in developing countries,
women are 18 per cent less likely than men to own a smartphone in 2022,
compared with 16 per cent in 2020 (Sibthorpe, 2022).

3.1.3 The increased role of data and digital platforms

With the increase in online activities, global Internet bandwidth rose by 35 per cent
in 2020, the greatest one-year increase since 2013. Monthly global data traffic is
expected to rise from 230 exabytes in 2020 to 780 exabytes by 2026 (UNCTAD,
2021p). People’s lives have become more dependent on real-time data and
technological assistance, in areas ranging from carrying out daily activities to
monitoring and controlling the pandemic and developing new vaccines in record
time. Many developing countries face difficulties in harnessing digital opportunities.
In contrast, reliance on data and digital solutions during the pandemic has boosted
the performance of leading digital platforms, which are based mainly in China and
the United States. Most digital solutions used amid lockdown measures and travel
restrictions, such as e-commerce, telecommuting and cloud computing, were
provided by a relatively small number of large companies from these countries.
Global platforms have not only been resilient to the crisis, but their business models
and dominance, combined with the strong demand for digital services, have lifted
them to a higher income growth path. In October 2019–January 2021, the New York
Stock Exchange Composite Index increased by 17 per cent and, in the same period,
the stock prices of two leading platforms rose by 55 and 144 per cent (UNCTAD,
2021p). In addition, the pandemic served to move many consumers into a digital
environment that is not as safe and welcoming as it could be (UNCTAD, 2021o).
False and deceptive advertising can spread quickly through online platforms, adding
the risk of monetary and physical damage for consumers including, for example, due
to alleged or false remedies that can lead to serious harm or health risks. In this
regard, in 2020, Ebay blocked or removed over 17 million listings that violated the
consumer protection rules of the European Commission and Google blocked or
removed over 80 million pandemic-related advertisements globally (UNCTAD,
2021l). The pandemic has also served to exacerbate the existing vulnerabilities of
new online consumers who may be less familiar with digital tools and therefore
more prone to digital fraud. For example, elderly consumers may lag behind
younger consumers in levels of digital capability due to a combination of health and
cognitive ability-related factors, making the elderly more vulnerable to online
financial exploitation and increasing the need to ensure their digital capability
(UNCTAD, 2021l).

34
3.2 Policy responses
UNCTAD, through research and technical assistance, has identified various policy
actions taken in connection with the pandemic. Most Governments prioritized short-
term measures and some have also begun to address longer-term strategic
requirements for post-pandemic recovery. Measures taken include public awareness
campaigns concerning e-commerce, training in digital skills, increased use of
paperless processes in countries using the UNCTAD Automated System for Customs
Data, reductions in the costs of e-payment transactions and the lowering of barriers
to the use of e-commerce for both businesses and consumers.

In Africa, in Malawi, the conduct of an UNCTAD eTrade Readiness Assessment

helped inform the digital component of the post-pandemic socioeconomic recovery
plan; in Senegal, the conduct of an eTrade Readiness Assessment helped catalyse
the adoption of a strategic framework to promote e-commerce and the digital
economy, which forms an integral part of the implementation of the national
strategy for e-commerce development; and, based on the Automated System for
Customs Data guidelines for customs administrations, a number of countries
implemented paperless procedures, with Angola, Eswatini, Lesotho, Rwanda,
Uganda, Zambia and Zimbabwe increasing the average use of paperless procedures,
from 30 per cent in 2019, before the pandemic, to 82 per cent in the first quarter of
2022 (UNCTAD, 2022k; figures from the Automated System for Customs Data
programme).

In Asia and the Pacific, in Cambodia, a new law aimed at easing the registration of e-
commerce businesses; Indonesia launched a capacity-building programme to
expedite digitalization among microenterprises and small and medium-sized
enterprises, facilitated collaborations between the banking sector and financial
technology companies and supported the use of digital payments; in Kiribati, digital
solutions were implemented to deal with the spread of the coronavirus and gave
fresh impetus to efforts to harness development gains through ICTs and e-
commerce; and, in the Lao People’s Democratic Republic, UNCTAD helped raise the
profile of e-commerce in the context of the ninth national socioeconomic
development plan, taking into consideration the impact of the pandemic (UNCTAD,
2021k; UNCTAD, 2022k).

In Latin America and the Caribbean, Costa Rica launched a platform for businesses
that did not have a previous online presence, as well as a smartphone application
and short messaging service to facilitate trade among producers of agricultural,
meat and fish products; and Peru introduced a programme to close digital
connectivity gaps and provide free Internet access in rural areas (International
Monetary Fund (IMF), 2021a; UNCTAD, 2021k).

35
The crisis affected microenterprises and small and medium-sized enterprises in
particular, and many public authorities have taken steps to facilitate the economic
recovery of such enterprises. The implemented measures have been aimed at
improving access to financing, through new financial instruments and new financing
technologies; facilitating the digitalization of the manufacturing and marketing of
products; facilitating market access for such enterprises by eliminating technical and
administrative barriers; promoting the participation of such enterprises in public
procurement; and fostering innovation (UNCTAD, 2022h). Initial measures to protect
online consumers have been complemented by more long-term policies. Many
Governments initially undertook decisive action against price gouging and/or
unjustified increases, refusals of refunds for cancelled events or travel and unfair or
misleading practices such as with regard to health-related products offered for sale
online (UNCTAD, 2021l). Later, the focus shifted to taking palliative action against
the disconnection of public utilities services, including bill deferral and payment
extension plans and subsidized access for low-income households (UNCTAD,
2021m). Additional priority areas included making information and education
available online and through social media, facilitating access to effective online
dispute resolution and enhancing good business practices online, particularly by
digital platforms (UNCTAD, 2021l).

3.3 Challenges in harnessing digital solutions for recovery and

Development
In a survey on the impact of the pandemic on e-commerce businesses in developing
countries, many drew attention to the need for national strategies and coherent
responses to e-commerce and the digital economy (UNCTAD, 2020h). Most
developing countries still lack comprehensive strategies in this area. In those that
have such strategies, gender considerations are often not mainstreamed. In the
absence of robust policy and regulatory frameworks, countries are less prepared to
harness opportunities from digitalization and such opportunities are likely to be less
fairly distributed among different segments of the population, including between
women and men. The pandemic served to make more evident the lag in
development related to the significant digital divides within and between countries.
Some 96 per cent of the 2.9 billion people that remain offline live in developing
countries and, within many developing countries, there are also significant divides
between men and women, urban and rural areas and large and small companies
(International Telecommunication Union, 2021). Moreover, when people and
businesses in low-income countries connect to the Internet, they do so typically at
relatively low download speeds and at relatively high prices. In parallel with
increasing inequality trends worldwide, the pandemic has served to reinforce the

36
need to bridge not only the conventional connectivity divide but also the rapidly
expanding data divide. Limited or unaffordable connectivity and the usage divide
hinders businesses and consumers from engaging in online activities. Countries that
lack the capabilities to turn digital data into digital intelligence face a significant
barrier in benefiting from the data-driven digital economy from the perspective of
creating not only private value but also value for society as a whole. A lack of digital
entrepreneurship and skills hinders the ability of microenterprises and small and
medium-sized enterprises to adapt to digital transformation. Digital
entrepreneurship focuses on leveraging digital technologies or digital business
models to explore and exploit entrepreneurial opportunities. A lack of digital
competence among entrepreneurs, as well as of adequate skills in the workforce,
are common bottlenecks to successful digital entrepreneurship (Soltanifar et al.,
2021). This includes women-led entrepreneurship. For example, e-commerce
markets in South-East Asia and Africa could grow by an estimated $280 billion and
$14.5 billion respectively in 2025–2030 if better training is provided to women
digital entrepreneurs (IMF, 2021c; IMF, 2021d). The UNCTAD eTrade for Women
initiative seeks to combine the transformative power of women’s entrepreneurship
with the positive impact of digital technologies through capacity-building and
community-building activities. Governments often lack financing or adequate
expertise and capacities to strengthen national digital readiness. More financing
options, including international financial support, are needed to mobilize the
required resources to address these challenges. Limited capacities may lead to
insufficient technical and analytical expertise in legislative and regulatory framework
development processes and hinder the ability of Governments to identify the
opportunities and risks associated with digital technologies, as well as ways to
address them (OECD, 2020b).

3.3.2. Challenges affecting impacts of the use of digital

solutions
Once people and businesses have access to affordable connectivity, there are
additional challenges to consider in the context of post-pandemic recovery.

One such challenge is in protecting online users, which involves ensuring trust in the
digital environment, notably with regard to digital and data security, data privacy,
consumer protection and cybersecurity. In many developing countries, there is a
lack of relevant legislation in this regard. For example, in Africa, only 50 per cent of
countries have adopted laws on online consumer protection and 61 per cent, laws
on data protection (UNCTAD, n/d). The use of contact tracing and other applications
has raised concerns about privacy and other human rights and data protection. The
fact that data can be abused and misused for surveillance and other purposes by

37
organizations that control the data, whether private or public, affects trust and
limits the potential benefits that may be derived from the digital economy. Enacting
robust data protection legislation to safeguard users from commercial surveillance,
undeclared data collection and third-party data-sharing, as well as the tracking and
profiling of individuals by online platforms, would benefit all users.
Another challenge faced by consumers during the pandemic and at other times is
the purchase of unsafe products online, frequently through inadvertent cross-
border transactions using online platforms. Many consumers may not be aware of
their rights in online markets and/or of avenues through which to obtain redress or
seek effective dispute resolution, and such avenues may be limited.
One challenge is related to the use of artificial intelligence, a key component of
digital transformation, which may have negative effects. For example, statistics and
information on women and women’s perspectives are often excluded from the data
sets that underly algorithmic decision-making. Algorithms related to mortgage
lending, for example, have been found to offer less than half of available credit
limits to women applicants, compared with men applicants with equivalent incomes
and in similar geographical locations (Susarla, 2022). In addition, concerns about
cybercrime increased during the pandemic due to the greater reliance on digital
tools. Pandemic-related scams and phishing campaigns increased as related actors
took advantage of the significant switch to online activity. For example, scams
increased by 400 per cent in March 2020 and, in 2020, the highest average cost of a
data breach, valued at $8.64 million, occurred in the United States (Sobers, 2021).
Another challenge is linked to growing concentration in the digital market. Major
digital platforms provide important benefits in facilitating the access of firms,
including microenterprises and small and medium-sized enterprises, to new markets
and expanding the offer of products and services to consumers, yet the exponential
growth of such platforms, which confers significant market power, can have
negative effects on competition. The pandemic has further accentuated such market
power and the role of digital platforms in society and the global economy (UNCTAD,
2021n). This issue needs to be considered in formulating policy responses for post-
pandemic recovery. A broader concern is that the accelerating pace of digital
transformation will result in an even more unequal distribution of benefits within
and between countries. Digital and data related inequalities, asymmetries and
power imbalances, both within and between countries, threaten to derail progress
towards achieving the Sustainable Development Goals, and require Government
actions. There are several dimensions of such inequalities. Gender-based digital
divides are often the result of underlying inequalities and gender-related gaps in
society. Other dimensions include geography (e.g. urban and rural areas), level of
education and digital skills, income, employment status and function, age and
ethnicity. Income and social inequalities are increasing globally and digital inequality
will follow (Van Dijk, 2021).

38
3.4 Leveraging digitalization for post-pandemic recovery
As countries gradually and unevenly emerge from the pandemic, a return to
business as usual is no longer an option. Work, education, entertainment and
communications are likely to be more dependent on digital technologies than
before the pandemic. This accentuates the need for public policies that can
maximize opportunities and address challenges and concerns related to
digitalization, including policies and regulations that ensure that the digital economy
works for the benefit of people and the planet. Governments, in dialogue with other
stakeholders, need to amplify efforts to enable more people and businesses to make
use of digital solutions while at the same time reducing the possible risks and the
challenges involved. Policy responses are needed at the national, regional and
international levels.

At the national level, Governments are encouraged to:

• Develop public policies to bridge digital divides and build capacities to
harness data and digitalization for development. Positive development
outcomes do not result automatically unless digitalization is facilitated and
supported by appropriate public policies and measures to shape the digital
economy in ways that lead to inclusive and sustainable outcomes.
Governments may need to prioritize national digital readiness so that more
local businesses, including those led by women, can become not only users
but also producers and innovators in the digital economy. In order to be
able to add domestic value to data and develop the economy, policymakers
also need to engage in international processes to ensure more equal
outcomes from digitalization.

• Develop holistic approaches to enhance digital readiness and ensure an

equal share of benefits. The speed of digital change makes it difficult for
policymakers to respond effectively. Moreover, the issues involved in
digitalization are cross-cutting in nature and often new to the government
departments concerned. Enhancing the digital readiness of Governments,
businesses and consumers therefore requires a holistic and whole-of
government approach. For example, an effective framework to protect
online consumer data needs joint efforts and coordination and cooperation
between government authorities on consumer protection, data protection
and competition. Digital economy policies implemented using a silo
approach are likely to result in suboptimal outcomes.

39
 • Mainstream gender equality in national digital strategies. This requires
making access to digital technology cheap and reliable, developing
technologies that are easy to use, making content relevant to women and
upgrading women’s digital literacy and skills as both users and content
creators. Collecting qualitative and quantitative information on difficulties
and needs particular to women is also important in enabling countries to
develop relevant solutions and responses. The potential gender-related
impacts of the use of artificial intelligence and other digital technologies
also need to be examined starting at the conception stage, to avoid
unintended negative repercussions for women. Full participation by
women in policymaking and technical processes related to digital
technologies can contribute in this regard.

• Build resilience, during post-pandemic recovery, that involves, inter alia,

efforts to make economies more diverse and resilient. Servicification, such
as through the incorporation of services in the production of goods and by
digitalizing the delivery of services, can be important in this context. Inputs
from services to downstream activities can contribute to increasing
productivity and competitiveness (UNCTAD, 2017a). Some sectors can
leverage digital technologies and data to develop new business
opportunities and enhance productivity (UNCTAD, 2022l).

The international community is encouraged to:

• Foster global dialogue and collaboration in areas of relevance to
digitalization for development. This may include efforts to design and
implement rules for a more inclusive outcome from digitalization and to
identify new pathways for the digital economy. Given the urgent need to
bridge gaps in digital readiness and the insufficient levels of development
assistance in this area, enhanced collaboration among members of the
development community is important. Building the capacity of low-income
and middle-income countries to participate in and shape the digital
economy requires partnerships, to avoid the duplication of efforts and to
make effective use of scarce resources. The eTrade for all initiative led by
UNCTAD is an example of such a solution.

• Take into consideration the fact that the global sharing of data is essential
in developing public goods that can help address major development
challenges, such as poverty, hunger and climate change. In this context,
global data governance and international cooperation are even more
relevant. International organizations and development partners also play a

40
 role in enhancing the capacities of developing countries to transform into
digital intelligence the raw data generated by their populations. Key in this
context is the global digital compact proposed by the Secretary-General of
the United Nations (United Nations, 2021b).

• Note that a balanced and holistic global approach to data governance is

needed that reflects the multidimensionality of data and engages different
stakeholders, since data value chains are global and data protection cuts
across different legal areas that tend to act in silos and sometimes
compete; legislative frameworks worldwide are varied, making their
national application the main legal obstacle to the effective protection of
data privacy; and fragmentation and data localization tendencies can
hinder development gains from the use of data and widen existing
inequalities (UNCTAD, 2021p). Moreover, the increasing global reach,
market power and influence of major platforms make the need to
strengthen international cooperation on platform regulation and data
governance more urgent, as self-regulation has led to business models
defined by platforms that predominantly benefit themselves, with various
development and policy implications.

• Take into consideration the concentration of market power and emerging

issues related to consumer protection. Global responses may be required
to regulate the relationships between business users and platforms and
prevent abuses of market power by dominant digital platforms. Current
market structures incentivize a race to the bottom, whereby businesses
that comply with data protection laws are less competitive, leading to
fewer choices for consumers and preventing switching. A shift in data
harvesting, from an opt-out to an opt-in paradigm, can better align the
incentives for fair competition and the effective protection of consumers in
a more proactive manner (UNCTAD, 2021r). Greater effort should be made
to deliver effective online dispute resolution for consumers, including for
cross-border cases. In the area of consumer protection online, UNCTAD has
worked with relevant stakeholders and, in 2021, a recommendation was
adopted on preventing the cross-border distribution of known unsafe
consumer products (UNCTAD, 2021j). In the area of competition in digital
markets, UNCTAD is preparing a set of recommendations to assist
developing countries in regulating the relationship between digital
platforms and microenterprises and small and medium-sized enterprises, to
ensure that the latter can fully benefit from the digital economy.

41
• Scale up financial and technical support for developing countries, in
particular the most vulnerable. Resources are needed to help countries
meet increasing financing needs at a time when fiscal space is shrinking
and debt burdens are growing in low-income and middle-income
countries, making the mobilization of domestic resources even more
difficult. Current financial support from the international community is
far from enough, as shown in recent Aid for Trade commitments.
UNCTAD calculations, based on OECD data, show that the share of Aid for
Trade resources allocated to the ICT sector increased from 1.2 per cent in
2017 to 2.7 per cent in 2019 and remained unchanged in 2020. The share
in recent years has remained below the level of 3 per cent in 2002–2005.
Technical assistance and capacity-building from the international
community, including, for example, through UNCTAD eTrade Readiness
Assessments, e-commerce strategy development and competition and
consumer protection policies and frameworks (see UNCTAD, 2020d), are
critical in raising awareness of the development implications of data;
developing national data strategies; strengthening legal and regulatory
frameworks; and helping to ensure the participation of developing
countries in regulatory processes and developments at the international
level.

42
 CHAPTER – 4

DEVELOPMENT FINANCE LANDSCAPE IN TIMES OF

THE COVID-19 PANDEMIC
As has been seen in the case of previous external shocks, the COVID-19 pandemic
has put pressure on the financing possibilities of developing countries. The financing
requirements of developing countries to combat the crisis and stabilize the financial
situation have been estimated by the IMF at around $2.5 trillion (Georgieva, 2020).
The economic shock developing countries suffered in second quarter of 2020 was
unprecedented. Net portfolio outflows from the main emerging economies
amounted to around $60 billion in just one month. This is more than double what
these countries experienced in the immediate aftermath of the global f inancial
crisis of 2008/09. The spreads on developing country bonds have risen sharply,
currencies have depreciated strongly, exports of developing countries dropped
precipitously, and commodity prices also weakened (UNCTAD, 2020e).

What is assessed in this chapter is how the COVID-19 crisis has changed the
development f inance landscape, and whether the financing gaps of developing
countries during the pandemic and the recovery have been covered through support
from the international community.1 Policy recommendations are provided that
indicate how the international community could help developing countries to
substantially lessen their financing gaps.

4.1 Global financial safety net

To avoid worsening liquidity transforming into a balance-of-payment crisis,
developing countries had to rely on the global financial safety net. The global
financial safety net comprises the set of institutions, arrangements and agreements
on the global, regional and bilateral levels that provide temporary balance of
payments finance to countries in temporary financial distress. The main elements of
the global financial safety net are conditional and unconditional emergency lending
by the IMF, regional financial arrangements and bilateral currency swap
arrangements between central banks. The potential financing available from these
three sources reached $3.7 trillion or about 4.5 per cent of world GDP in 2021
(Muehlich et al., 2022).

43
Regional financial arrangements were the smallest component during the first two
years of the pandemic, as they provided only around $6.6 billion of support to
member States. In spite of the small amount, regional financial arrangements were
relatively more important to upper-middle income countries and lower-middle-
income countries than to countries in other income groups.2

The support from the IMF was much greater, as the institution approved around
$170 billion in new financing. This amount has supported 90 countries, mainly
through the precautionary and liquidity line and the flexible credit line. The IMF also
provided grants to 31 of the most vulnerable countries through its Catastrophe
Containment and Relief Trust, covering debt service to the IMF falling due between
April 2020 and April 2022, amounting to around $1 billion (United Nations, Inter-
Agency Task Force on Financing for Development, 2022).

1 Domestic resource mobilization is presented in chapter 5 where the role of the

State is discussed.
2 Income group classifications refer to World Bank country group classifications as
of 2021 (see https://datahelpdesk. worldbank.org/knowledgebase/articles/906519-
world-bank-country-and-lending groups). The classification of developing, emerging
and advanced economies refers to IMF country classifications (see
https://www.imf.org/ external/pubs/ft/weo/data/changes.htm). The income group
of high-income countries includes emerging as well as advanced economies. The
income groups of low-income countries and middle-income countries is composed
of developing and emerging economies.

Currency swaps have been, by far, the largest component of the global financial
safety net response during the pandemic. At their peak in April 2020, the volume of
active currency swap agreements was around $1.7 trillion. This is about $600 billion
more than before the pandemic (Muehlich et al., 2022). While bilateral currency
swaps are a relatively cheap source of external finance, the main problem is that
they are not available to all central banks in the world. Instead, the central banks of
reserve currencies, such as the Federal Reserve of the United States of America,
provide them to central banks on the basis of geopolitical and other interests. One
consequence of that selective stance has been that low-income and many lower-
middle-income countries are systematically excluded from the largest crisis finance
element. From the point of view of developing countries, this system is highly
inadequate as it reinforces the hierarchical nature of the global dollar access. It
requires countries without swap access to maintain inventories of the debt of the
Government of the United States.

44
The current uneven and piecemeal set-up of the global financial safety net
contributes to the f inancial vulnerability of low-income and lower-middle-income
countries. Lack of access to global financial safety net on a timely, sufficient and
unconditional basis for these countries implies a higher probability of having a
liquidity crisis turn into a solvency crisis. After two years of the pandemic, the global
financial safety net remains systematically unequal in terms of volume and quality of
access to liquidity. As shown in figure 4.1, more vulnerable and poorer countries
have fewer choices and reduced access to the necessary support. An alternative
would be to establish a rules-based system of multilateral policy coordination where
the key element would be a wider global financial safety net, with currency swaps
established on a multilateral, not a bilateral, basis (UNCTAD, 2022a).

An important step in the right direction was a new allocation of special drawing
rights in August 2021, amounting to $650 billion. This represents the largest
allocation of special drawing rights in history. While this is a significant step forward,
there are still important issues to be resolved. Given that special drawing rights are
distributed on the basis of IMF quotas, low income countries have received only $21
billion (less than 3 per cent of the total). Thus, the countries that need additional
resources the most have the least access to them. Developing countries as a group
have received 40 per cent of the new allocation. To magnify the impact of the new
allocation of special drawing rights, the IMF has suggested to member countries that
they voluntarily direct their unused special drawing rights to vulnerable countries.
However, this does not guarantee that there will be a sufficient transfer of unused
special drawing rights to the countries that need them.

There are currently several proposals for the reallocation of special drawing rights.
One proposal is the newly approved IMF Resilience and Sustainability Trust that
would potentially f inance Sustainable Development Goal-related investment
projects in low-income and vulnerable middle-income countries. Another proposal is
to allocate special drawing rights to fund the Liquidity and Sustainability Facility
launched by the Economic Commission for Africa. A third proposal is to use special
drawing rights to enhance the IMF Poverty Reduction and Growth Trust. The fourth
proposal is to use special drawing rights to bolster the lending capacity of
development banks and regional financing institutions (Economic Commission for
Africa–Economic Commission for Latin America and the Caribbean, 2022).

45
4.2 Debt and debt sustainability
As Governments reacted to the crisis by adopting large stimulus packages,3 global
debt levels increased substantially. For example, global public debt reached a level
of around 100 per cent of world output in 2021 (United Nations, Inter-Agency Task
Force on Financing for Development, 2022). Developed countries increased their
debt levels more than developing countries due to their much larger stimulus
packages. But debt sustainability deteriorated much more in developing countries.

Even before the pandemic, there were clear signs of deteriorating debt sustainability
in many developing countries. Total external debt of developing countries increased
from $6.5 trillion in 2011 to $11.1 trillion by 2021. The debt-to-GDP ratio for all
developing countries (excluding China) reached 45.4 per cent in 2021, with the ratio
for small island developing States4 rising to 90.5 per cent. The debt-to-exports ratio
for the least developed countries rose to 188.1 per cent in 2021, and for small island
developing States, this ratio reached 329.1 per cent on average in 2021, in large part
because of the steep decline in tourism and other exports (UNCTAD, 2022f). In 51
developing countries, the debt-to-export ratio stood above the risk threshold of 240
per cent used in the debt sustainability framework of the IMF and the World Bank.

Sustainability risks increased for all countries, but particularly for the least
developed countries and low-income countries. According to the IMF and World
Bank debt sustainability framework, half of the 69 least developed countries and
low-income countries that use that framework were assessed at high risk of debt
distress or in debt distress in 2019. In 2022, this proportion increased to 60 per cent,
doubling the level of 2015 (United Nations, Inter-Agency Task Force on Financing for
Development, 2022). In addition, developing country bond yields have been on the
rise since September 2021, a clear sign that inflationary pressures brought the era of
abundant liquidity and low interest rates to an end. Access to external financing
deteriorated further in the second quarter of 2022 due to uncertainties related to
the war in Ukraine. This tightening of financial conditions come on top of the already
grim economic situation in many developing countries, burdened by low vaccination
rates, slower growth, higher joblessness and rising poverty and famine.

Recognizing the need to help developing countries to bridge financing gaps, finance
ministers of the Group of 20 endorsed the Debt Service Suspension Initiative in April
2020. Debt service payment to official bilateral creditors was suspended for eligible
countries to bolster their crisis mitigation. There were 73 eligible countries, of which
48 participated in the Initiative. These countries received $12.9 billion in debt
servicing suspension over the duration of the Initiative, until the end of 2021 (World
Bank, 2022).

46
While the intention of the international community to help more vulnerable
countries to withstand the shock of the pandemic should be commended, there are
several challenges that have to be addressed. First, the expiration of the Debt
Service Suspension Initiative at the end of 2021 did not take into account that the
pandemic was not yet over. Second, the countries that participated in the Initiative
will have to repay their deferred payments between 2022 and 2024. These additions
to the servicing of their external debts mean that Initiative-participant countries will
have to repay around $42 billion per year over the next three years (UNCTAD,
2022a). Finally, the number of countries whose financing possibilities were adversely
impacted by the pandemic is much greater than the list of Initiative-eligible
countries. Many middle income countries encountered problems similar to those of
the least developed countries and low-income countries but were side-stepped in
terms of international support. For example, while 13 small island developing States
benefited from the Initiative, this represents only 22 per cent of the countries in this
highly vulnerable country grouping.

As this debt-servicing respite was only temporary, the Group of 20 and the Paris
Club endorsed the Common Framework for Debt Treatments Beyond the Debt
Service Suspension Initiative in November 2020. The Common Framework aims at
coordinating the debt restructuring undertaken by official and private creditors,
extending the scope beyond the debt deferral of the Debt Service Suspension
Initiative. In addition to incorporating private creditors, it also intends to incorporate
non-Paris Club member lenders, and to ensure fair burden sharing across all
creditors. In spite of the fact that the Initiative ended in 2021, the uptake and
implementation of the Common Framework has been disappointing, with only three
countries so far starting the process.

The main lesson learned is that debt vulnerability is an issue that has not received
adequate attention and that a more ambitious policy agenda is needed. Besides the
small and insufficient amounts provided to developing countries to bridge their
financing gaps during the pandemic, there are broader issues of reforming the debt
architecture. The existing sovereign debt architecture is ill-suited to address a
systemic crisis (UNCTAD, 2020g). The Common Framework is a small step forward,
but not a substitute for a comprehensive debt restructuring mechanism (United
Nations, Department for Economic and Social Affairs, 2022). What is required is a
revitalization of a multilateral debt resolution framework in line with the basic
principles for sovereign debt restructuring process that the United Nations General
Assembly approved in its resolution 69/319 in 2015 (United Nations, 2015a). It
should be based on the concept of debt sustainability that incorporates the
financing requirements for developing countries to recover from the pandemic,
achieve the Goals, and implement climate mitigation and adaptation strategies.

47
UNCTAD has proposed three principles for a comprehensive solution of the debt
problems of developing countries: (a) make automatic temporary standstills longer
and more comprehensive; (b) adopt debt relief and restructuring programmes that
would restore long-term debt sustainability; and (c) establish an “international
developing country debt authority” to oversee the implementation of temporary
standstills and debt restructuring programmes (UNCTAD, 2020g).

4.3 Foreign direct investment and other private finance

As has been the case with previous external shocks, private finance has been more
volatile than other types of finance during the COVID-19 pandemic. As mentioned
earlier, in just one month, portfolio outflows from main emerging market economies
reached $60 billion at the height of the uncertainty in the second quarter of 2020. In
2020, foreign direct investment recorded a steep fall of 35 per cent, reaching $963
billion, less than half of the peak in the middle of the last decade when it reached
around $2 trillion. Moreover, the fall in foreign direct investment in 2020 was
greater than the fall during the global financial crisis a decade earlier, and also much
greater than the respective fall in trade and GDP in 2020. While foreign direct
investment in developing countries declined much less than in developed countries,
the average for developing countries conceals large geographical disparities. In
2021, foreign direct investment rebounded strongly, reaching $1.58 trillion and
exceeding pre-COVID-19 levels. Foreign direct investment flows thus continue to be
an important source of external f inance for developing economies, together with
other cross-border flows. The large rebound of foreign direct investment in 2021
was possible partly because of a booming merger and acquisition markets and rapid
growth in international project finance as a result of loose f inancing conditions and
major infrastructure stimulus packages. The swift and profound macroeconomic
policy support, with both fiscal and monetary instruments, helped stabilize the
economy and calm the markets.

Despite the fact that the number of greenfield projects rebounded in 2021 (11 per
cent), they remained below the pre-pandemic level. Greenfield projects in the
primary sector and in manufacturing, both essential for structural transformation in
developing economies, have been particularly slow in recovering to previous levels.
Given the importance of greenfield projects for the increase of productive capacity
in developing countries, this is of much concern. In particular, the pandemic has
revealed the global feebleness of pharmaceutical sectors in developing countries.
Policies tailored to attract and retain foreign direct investment in strategic sectors,
including those that are crucial for public health, will have to be much higher on the
agenda of policymakers in developing countries (United Nations, Inter-Agency Task
Force on Financing for Development, 2022).

48
At the upstream end of investment, the global market for sustainable financial
products (funds and bonds) grew to $5.2 trillion in 2021, up by 63 per cent from
2020. The pandemic has brought into focus the threats from environmentally
related risks and their material impact on investors. This has accelerated moves to
decarbonize portfolios by institutional investors, such as pension funds, and put in
place environmental disclosure requirements by stock exchanges (UNCTAD, 2022b).

Even if foreign direct investment stock is relatively stable, private finance tends to
have procyclical effects in developing countries and thus puts an even greater
burden on other forms of finance to compensate for these adverse effects. The
shock of the COVID-19 pandemic confirmed this lesson learned from previous crises
but as yet has not resulted in the policy action needed to remedy the situation. Two
possible and complementary actions can be envisaged. First, changing incentives to
move from short-term to longer business horizons is needed to make private
business and financial markets more resilient and sustainable. This will require
several changes, including to corporate governance (United Nations, Inter-agency
Task Force on Financing for Development, 2021). This is especially important for
channelling investment into activities and projects with positive sustainable
development impact.

Second, international investors, at both the upstream and downstream ends of the
investment chain, often cite macroeconomic conditions, as well as political risks and
weak regulatory frameworks, as some of the main obstacles to investing in
developing countries (United Nations, Inter-Agency Task Force on Financing for
Development, 2022). Another obstacle is the lack of investable projects, often at a
suitably large scale. While national Governments, investment promotion agencies
and even regional institutions can adopt measures to partially mitigate these risks, a
large part of the response is outside the scope of individual countries. Post-
pandemic, developing countries will need support to attract and facilitate
investment and ensure that it contributes positively to sustainable outcomes. With
the cascading problems stemming from the war in Ukraine, there is a risk that
developing countries will not receive the necessary support.

49
 CHAPTER – 5
RENEWED ROLE OF THE STATE AND
INTERNATIONAL COOPERATION
The COVID-19 crisis highlighted the pivotal role of the State, both at the national and
international levels. In this chapter, the discussion is focused on the implications of
the crisis for the role of the State and the need for international cooperation in the
post-pandemic recovery. The discussion is structured around three pillars to enable
the State to effectively steer the recovery and increase resilience, namely: the
availability of resources and State capacity; the social contract and trust; and
international cooperation and solidarity.

5.1 Availability of resources and State capacity

The role of the State has been essential in responding to the pandemic. Faced with a
simultaneous shock to both aggregate demand and aggregate supply, Governments
in developed countries adopted a “whatever it takes” approach and implemented
unprecedented measures, in dealing with and recovering from the crisis, to protect
the productive capacity of their economies and incomes of people.

Government responses to the shock caused by the pandemic were unprecedented

in swiftness and scale. In countries where domestic public resources allowed these
policies to be fully implemented, they greatly attenuated the worst effects of the
pandemic and shielded both households and firms from much greater and longer-
lasting difficulties. For example, cash safety nets helped reduce food insecurity
during the pandemic (Dasgupta and Robinson, 2022), while firms benefiting from
wage subsidies were less likely to lay off workers (Cirera et al., 2021). Stimulus
packages also contributed to the stabilization of financial markets after the initial
volatility and contagion at the onset of the pandemic.

Nevertheless, the ability of countries to extend emergency assistance depended

largely on their available resources, with Governments in developed economies
typically disposing of a greater fiscal space. Only countries with greater fiscal space
can respond countercyclically to an exogenous shock like the COVID-19 pandemic.
This difference in the response capacity between developed and developing
economies is illustrated in figure 5.1. In advanced economies, the sum of the
additional spending or foregone revenue plus the liquidity support (equity

50
injections, loans, asset purchases and debt assumptions) reached on average 23 per
cent of GDP. This is more than double what the emerging market economies could
afford (9.9 per cent of GDP) and 4.5 times larger than the support provided by low-
income countries, which are the most vulnerable to external shocks. Asymmetries
are even greater in per capita terms. For instance, in 2020, African countries spent
only $28 per capita on fiscal stimulus measures, compared to $629 in Europe and
$4,253 in North America (Economic Commission for Africa, 2022).

In addition to significant differences in discretionary fiscal measures between

developed and developing countries, there are also substantial differences in
relation to the extent to which automatic fiscal stabilizers were used.7 Given the
smaller safety nets and larger informal sectors in developing countries, their
automatic fiscal stabilizers were much weaker than those in developed countries
and therefore could provide less countercyclical support to the economy. The
consequence is that, in developing countries, households have to shoulder much
more of the burden of shocks such as the pandemic. This has particularly adverse
impacts on women, as they are more likely to lose their jobs and assume even more
responsibilities for care activities and, thus, are at a higher risk of dropping out of
the labour market and school.

All Governments felt the pressure on budgets from the public health crisis but in
developing countries they faced much more severe choices in allocating their scarce
resources, to respond adequately to the COVID-19 health crisis; support the
economy; cushion the impact of rising food and fuel prices on incomes of
households; or invest in long-term development priorities, such as infrastructure,
structural transformation and the Sustainable Development Goals. In many of these
countries, the adverse impacts of climate change and worsening debt crises further
constrained resource allocation decisions. Limited fiscal space and weaker health-
care and social protection systems made this external shock in developing countries
much more costly in terms of human suffering and economic damage.

The divergence in policy responses to the COVID-19 shock between developed and
developing countries also resulted in a differentiated pace for economic recovery.
The uneven growth trends are likely to continue in 2022 and looking forward
(UNCTAD, 2022a).

51
Beyond the availability of resources, steering a country out of a crisis as complex as
the COVID-19 pandemic requires strong State capacities, such as the ability to create
safety nets, manage public funds, digitalize and foster partnerships. Recent research
finds that the difference in infection cases across countries can be explained by the
nature and timing of policy responses (Ambaw et al., 2021), and that government
effectiveness is one of the key factors in determining vaccine roll-out (Tevdovski et
al., 2021). It is a positive sign that in the f irst year of the pandemic, government
effectiveness increased in most developing countries. According to the Worldwide
Governance Indicators (World Bank, 2021), between 2019 and 2020, government
effectiveness improved in 65 per cent of the least developed countries and 54 per
cent of developing countries.8

The COVID-19 pandemic has shown that only the State has the capacity to deal with
systemic shocks and that responses cannot be left to the markets. The State must
have the resources and capacities necessary to do the job properly. Strong
institutions and the availability of resources are thus a prerequisite at all income
levels to prepare for future shocks.

In the long run, building a more resilient economy and society will require an
overhaul of the f iscal systems in many developing countries. More diversified
economies are more resilient to shocks and at the same time provide a broader tax
base on which a stronger fiscal system can be built. Therefore, structural
transformation and building productive capacity should be priority. This would also
enable countries to adopt universal social protection systems, which play a pivotal
role in crisis situations. Governments of developing countries should aim at
increasing the proportion of GDP they raise in tax revenue through, for example, the
better targeting of mining and oil companies and real estate and by more actively
and progressively taxing the income and assets of wealthy citizens, increasing excise
taxes on alcohol and tobacco, and increasing the transparency and efficiency of tax
administration through the use of ICT (Moore and Prichard, 2017).

Short-term measures to increase the availability of resources in developing

countries inevitably have to rely on international support and cooperation. The
proposals developed in chapter 4 on financing for development issues are also
pertinent to this section. Domestic public resources can also be boosted by
enhancing international tax cooperation. There is significant scope to strengthen
domestic public resources in developing countries by combating illicit f inancial
flows. For instance, the tax-motivated component of illicit financial flows (including
profit shifting and tax evasion), on average, amounts to about 2.3 per cent of GDP in
both Latin American and African countries (UNCTAD, 2020c).9 The proposals

52
contained in the Inclusive Framework on Base Erosion and Profit Shifting of the
OECD and Group of 20 aimed at the redistribution of taxing rights in the world
economy are important but still under discussion. Pillar one includes digitalization
and globalization issues, while pillar two includes minimum tax rules at the
international level to protect national tax bases and limit tax competition (United
Nations, Inter-Agency Task Force on Financing for Development, 2022).

5.2 Trust and social contract

In their interventions to confront the COVID-19 pandemic, many national
Governments placed the welfare of their citizens before the special interests. This
represents a hopeful sign that there might be a move towards a new social contract
that is sorely needed to overcome the vulnerabilities and inequalities inherent in the
current global order.

But it was evident even before the COVID-19 pandemic that the world needed a new
path. That is why the international community adopted the Addis Ababa Action
Agenda, the 2030 Agenda for Sustainable Development and the Paris Agreement in
2015. The 2030 Agenda for Sustainable Development is clear: “We are determined
to take the bold and transformative steps which are urgently needed to shift the
world on to a sustainable and resilient path” (United Nations, 2015b). In effect, this
represented a call for radical reforms to reverse the policy direction of the last four
decades and establish a new social contract that works for all.

Economic inequality had been recognized as a particularly important obstacle for

repairing the social contract on which inclusive and sustainable outcomes can
emerge. Economic inequality has been steadily rising over the last four decades and
has further increased during the pandemic (Institute for Policy Studies, 2021; The
New York Times, 2020; and The Guardian, 2020b). According to Chancel et al.
(2022), the top 1 per cent of the world population captured 38 per cent of all
additional wealth accumulated from 1995 to 2021, while the bottom 50 per cent
received only 2 per cent of it. The increase in inequality has eroded trust in
institutions, in democracy and in the State, and in their ability to deliver just
outcomes. Citizens got the impression that the system was rigged and only worked
for those at the top (Stiglitz, 2013). This resulted in populist backlashes in many
countries. In 2019 alone, there were protests and civil unrest in a quarter of all
countries in the world (The Guardian, 2020a).

53
Economic inequality has a corrosive impact on trust in society. As figure 5.2 shows,
interpersonal trust is inversely correlated with income inequality. As individuals lose
trust that others in society will do what is good not only for them, but also what is
good for the whole community, their level of compliance with rules, laws and
government measures diminishes. An analysis of contextual factors with regard to
the impact of COVID-19 in 177 countries showed, among other things, that higher
levels of trust, both trust in Government and interpersonal trust, had large,
statistically significant associations with fewer infections (COVID-19 National
Preparedness Collaborators, 2022). With a contagious disease such as COVID-19,
following rules, trusting institutions and complying with government regulations and
recommendations is of the utmost importance if the international community wants
to minimize the adverse effects in terms of economic costs and human suffering.

The pandemic reinforced the call for a new social contract to better respond to
future challenges – a new social contract that rebalances the relationship between
capital, labour and nature, a contract that rebalances the relationship between the
State and the markets, between the public and private interests and between
globalization and national authority. Inequality and economic instability have to be
reduced if the world wants the new social contract to lead to a more stable and just
society. The international community must also promote global public goods such as
a stable climate, clean air, biodiversity, stable global macroeconomic conditions and
global cooperation, all of which have experienced rapid deteriorations. This vision is
reflected in the United Nations Secretary-General’s Our Common Agenda, as well as
in the ongoing work at the United Nations to value economies beyond GDP.

A more progressive tax system is an important element. It would increase fiscal

revenues and thus the availability of resources for the State. It would enable
financing of public services that treat every citizen equally, particularly in the areas
of health, education and pensions.

Furthermore, policymakers need to rebalance the priority given to short-term

efficiency and longer-term resilience. This will allow for better planning for a
pandemic, a climate emergency or any other unforeseen disaster.

The focus should be on building a world with more resilient individuals, households,
firms and economies. Systemic sustainability should be the strategic imperative for
the future. Public health has to be seen as an investment in the future. That is the
only way to be prepared for another pandemic. One important lesson of the COVID-
19 pandemic is that preventing the spread of disease spares lives and improves well-
being, but also saves jobs and minimizes economic disruption.

54
More generally, the COVID-19 recovery efforts and a more prominent role for the
State can help to reorient policies towards more sustainable, inclusive and
productive development strategies. In responding to the unprecedented scale of the
pandemic’s impacts, Governments resorted to extraordinary policies, including
sanitary measures, emergency assistance programmes and economic stimulus
packages. Although many of these policies are temporary, some will have
transformative effects. The degree to which countries can orient these policies
towards long-term national objectives, and use them to drive structural change, can
therefore be a positive opportunity amid the disastrous effects of the pandemic.

Opportunities are also provided by the post-pandemic recovery measures. Stimulus

packages can be structured to offer an extraordinary boost to transformative
priorities. Conditions for the investment and consumption components of these
packages can favour, for example, renewable energy generation and distribution
infrastructure, green mobility solutions and sustainable agricultural practices. Grants
and loans can support water and energy-efficient retrofits to housing stock and
industry and favour entrepreneurs and businesses in priority industries, such as
clean energy and medical supplies. Exceptional programme spending can be an
opportunity to break away from unsustainable policies, such as fossil fuel subsidies,
towards policies that boost resilience, such as social protection and income
diversification programmes.

To showcase exemplary policy solutions, and to increase transparency on

government spending and maximize the impact of stimulus packages, the Oxford
University Economic Recovery Project created the Global Recovery Observatory.
This observatory gathers policies and assesses them for potential environmental
impact (greenhouse gas emissions, air pollution and natural capital) and social
impact (wealth inequality, quality of life and rural livelihood). According to these
data, in 2020–2021, out of the $3.8 trillion of total recovery spending analysed,
green spending amounted to $0.97 trillion, or 31.2 per cent of the total
(O’Callaghan, B. et al., 2021). But the averages mask important differences across
countries. Developing countries, on average, allocated a smaller share of their
recovery spending to initiatives with positive environmental impact than developed
countries, at 12 per cent and 32 per cent, respectively (figure 5.3). Small island
developing States are a notable exception, as they dedicated one quarter of their
recovery packages on green initiatives, such as ecotourism, building upgrades,
energy efficiency infrastructure and climate change adaptation and resilience. This
reflects the priority given by small island developing States to environmental
concerns, as these economies are on the forefront of climate change-induced
shocks.

55
The analysis of the Global Recovery Observatory focuses on recovery, and thus more
long term spending. Nahm, Miller and Urpelainen (2022) provide an analysis based
on the total COVID-19 related spending in Group of 20 countries and found that, in
2020–2021, only 6 per cent of total stimulus spending contributed to cutting
emissions, that is, $860 billion out of the $14 trillion committed.

Regardless of the choice of methodology, the amount of green funding is far from
the investment necessary to put the world on track towards net zero emissions and
limit warming to 1.5°C. Lessons learned so far suggest that more transparency and
ex ante evaluation of stimulus measures are necessary, given that many
government-supported initiatives are likely to have a negative or mixed effect on
the environment. Furthermore, Governments need to better ensure coherence
between short-term objectives, for example, stimulating income and growth, and
longer-term commitments, such as nationally determined contributions submitted
under the Paris Agreement. Finally, the transition to the green economy needs to be
equitable, creating quality jobs, which in turn requires a greater focus on structural
transformation (OECD, 2021a).

5.3 International cooperation and solidarity

The pandemic has slowed progress towards the Sustainable Development Goals and
highlighted the interdependencies and vulnerabilities in the global economy,
underlining the need for renewed multilateralism, new approaches for development
and stronger international cooperation and solidarity. This is key for managing the
COVID-19 pandemic and addressing other global challenges, such as climate change
and conflict, amidst a worsening economic outlook and mounting food insecurity.

While decision-makers around the world acknowledge that building the resilience of
the global system to shock and protecting the most vulnerable is a shared
responsibility and the only feasible way forward, the action does not follow the
intent. Two examples – the intellectual property rights in relation to COVID-19
vaccines and the current international financial architecture – point to a gap in
action in international cooperation.

The COVID-19 crisis showed the need for a coordinated, global strategy to overcome
this crisis but that international cooperation with regard to COVID-19 vaccines,
therapeutics and diagnostics was insufficient. In efforts towards an effective
response to COVID-19, the ultimate goal is not only to produce a safe and effective
vaccine, but also to bring the pandemic to an end. That can happen only after
billions of doses are produced affordably and made available to everyone.

56
An important factor in support of adequate supply and equitable distribution of
vaccines, medicines and medical technologies is to remove some of the barriers
created by intellectual property rights in the area of technology transfer and to
encourage cooperation among manufacturers and research groups. This could
enable the simultaneous production by multiple manufacturers of safe and effective
vaccines and treatments when they emerge.

Towards this end, in October 2020, India and South Africa tabled a joint proposal at
the WTO on waivers from certain provisions of the Trade-Related Aspects of
Intellectual Property Rights Agreement aimed at the prevention, containment and
treatment of COVID-19. These specific provisions included patents, industrial
designs and copyright and protection of undisclosed information, i.e. “trade secrets”
(see sections 1, 4, 5, and 7 of part II of the Agreement). This waiver could contribute
to intellectual property rights not restricting the rapid scaling up of manufacturing
and not hindering equitable and affordable access for vaccines and treatments
throughout the globe.

As new diagnostics, therapeutics and vaccines for COVID-19 have been developed,
there have been significant concerns about how to make them available promptly,
in sufficient quantities and at affordable prices, to meet global demand. Research
has demonstrated the risk of intellectual property rights hindering the timely
provision of affordable medical products to patients (Crager, 2018). Some WTO
members have also carried out urgent legal amendments to their national patent
laws to expedite the process of issuing compulsory/government-use licences.

Some progress on the Agreement waiver has been made after more than a year of
negotiations. In May 2022, India, South Africa, the United States and the European
Union shared an outcome document from their quadrilateral discussions on
intellectual property COVID-19 response. The negotiations are still ongoing, and
more clarity is expected at the Twelfth Ministerial Conference of the WTO.

While there have been multilateral efforts at the WHO to initiate a technology
access pool for addressing the constraints of developing countries in recovering
faster from the pandemic, so far, no intellectual property holder has shown a
willingness to commit to the COVID-19 Technology Access Pool launched by Costa
Rica and WHO. This indicates the limitations of relying on voluntary measures and
provides further evidence of the need for a waiver and of the limited and
inadequate multilateral response to this crisis.

57
While there have been multilateral efforts at the WHO to initiate a technology
access pool for addressing the constraints of developing countries in recovering
faster from the pandemic, so far, no intellectual property holder has shown a
willingness to commit to the COVID-19 Technology Access Pool launched by Costa
Rica and WHO. This indicates the limitations of relying on voluntary measures and
provides further evidence of the need for a waiver and of the limited and
inadequate multilateral response to this crisis.

The second example of insufficient collaboration is the current international

financial architecture, as discussed in chapter 4. During the pandemic, the need of
developing countries for external liquidity support has increased greatly, while their
representation in international financial institutions and their decision-making
power remain very limited, particularly in the case of the least developed countries.
More inclusion in international financial decisions would likely lead to more
equitable progress on changes in special drawing rights allocations, currency swaps
and debt relief related to the pandemic, and in general on the financing demands of
the 2030 Agenda for Sustainable Development.

In conclusion, the COVID-19 pandemic has further exposed the weaknesses in the
structure of the international social and economic order, with direct implications for
the role of the State and international cooperation. It may be a once-in-a-lifetime
opportunity to remake society for a better future. The vision is there: the Addis
Ababa Action Agenda, the 2030 Agenda for Sustainable Development and the Paris
Agreement. Many tools are also available and can be activated. While there have
been some profound changes in certain aspects, more action is needed to succeed
in promoting and implementing that vision. This is particularly so, as the
international community is faced with a succession of crises and cannot afford to
return to business as usual.

58
 CHAPTER – 6
The unexpected COVID-19 global pandemic has posed new challenges for global
trade.Consequently, during the COVID-19 pandemic, the entire world has stagnated
its economic growth; this is reflected in India's growth. The growth is contributed by
effective foreign trade and its policies.The COVID-19 pandemic has opened up a new
avenue to understand the contribution of trade to economic growth. The current
study is aimed to understand the performance of Indian foreign trade inthe light of
select agricultural and non – agricultural products in COVID-19 pandemic. The study
results confirm that exports and imports have drastically declined due to India's
global pandemic and economic lockdown. Somehow it is recovered gradually but
not as it was before the pandemic. The study also found that bidirectional causality
has existed between India's GDP and imports during the COVID-19 pandemic.
Keywords: Agricultural products, COVID -19 pandemic, foreign trade, Indian
economy, Non- agricultural products

The world is unprecedented through great uncertainty, and countries worldwide

face economic depression as a severe consequence. Notably, many emerging
economies havebeen magnified financial crises due to the toCOVID-19 pandemic.
(McKee & Stuckler, 2020;Nicola et al., 2020). As per the forecast of WTO, global
trade was expected to decline up to 32 percent in 2020, which was the highest
decline ever since the great depression in the 1930s(WTO, 2020). Accordingly,
India's trade has been severely affected due to lockdown and production shutdown
to face the economic impacts of the COVID-19 outbreak (Rakshit& Basistha, 2020;
Veeramani & Anam, 2021). It has been witnessed that major companies Viz., Larsen
& Toubro, Grasim Industries, Ultra Tech Cement, Bharat Forge, Aditya Birla Group,
Tata motor, and BHEL have temporarily shut down their business operations. In the
fourth quarter of 2020, India's growth declined 3.1 percent, as per the Ministry of
statistics. Therefore, the Indian economy faces fresh challenges, particularly in the
pandemic's demand and supply-side elements.

Despite the economic crises during the COVID-19 pandemic scenario, the
government of India has initiated to face challenges in managing to overcome the
crisis as theeconomy is reviving in a V shape from the recession and navigation of
present policies to the new standard framework (Engineering Export Promotion
Council of India, 2020).

59
According to the Economic Survey of India 2020, the balance of payments
hasimproved from US$412.9 billion (March 2019) to US$433.7 billion (September
2019) of forex reserves. The current account deficit reduced to 1.5 percent (2019-
20) from 2.1 percent (2018-19) of GDP. India's five top trading partners are the USA,
UAE, China, Hong Kong, and Saudi Arabia. Further, as per ease of doing business,
world Bank 2020report, India improved its ranking from 143 (2016) to 68(2019). The
highest impacted sectors during the COVID-19 pandemic were tourism, aviation,
hospitality, and trade, whereas other sectors(Economic Survey of India, 2020). As
per the annual report of the Ministry of Commerce 2020, India's overall export was
a growing trend from the year 2010 to 2019 .

$274.8 US Millions to $538.08 US Millions. In the same way, India's imports also a
huge increasing trend from 2010 to 2019 from $348.4 US Millions to $455.14 US
Millions. The year 2018-2019 was considered the highest importing trend, which
reached $640.14 US Millions, and the highest exporting trend, which reached
$538.08 US Millions. However, comparatively the growth of importing trend was
higher than the exporting trend in India.

During the COVID-19 pandemic, imports and exports have been reduced by
nearly 24% - 30% from the previous year. The trade balance of India has also had a
negative trendfrom 2010 to date (Ministry of Commerce, 2020). Overall, India's
exports have declined by 25.42% during the quarter April-June, 2020 as compared to
the same quarter in April-June 2019. As a percentage of India's GDP, foreign trade
accounted for over 43 percent of India's foreign trade, with merchandise exports
accounting for $331.02 US Billion last year, out of the total exports of $535 US
Billion. Due to the sudden lockdown and logistics disruption on top of the global
slowdown, India's exports sector is likely to face a nearly10 percent dip this financial
year and between 20-30 percent in the crucial month of March. Based on the above
information, the present study examines how the COVID-19 pandemic affects India's
foreign trade performance about the GDP? This study explicitly reflects the COVID-
19 pandemic perspective from November 2019 to October 2020. This study
addresses two aspects of India's foreign trade. First, examine the performance of
the exports and imports of agricultural and non-agricultural products during the
pandemic, and second explore the causal relationship between exports, imports,
and GDP due to the pandemic outbreak.

The paper is structured as follows: After the introduction, detailed review

of literature in global and Indian contexts, the research gap, and the objectives of
the study. The research methodology is explained in the subsequent section. The
data analysis and results are presented and concluded with policy implications for
sustainable economic development through foreign trade.

60
Review of literature

The literature review analyzes the exports and imports trade before and during the
COVID-19 pandemic in global and Indian contexts.

Prior studies in the global context

Andrews (2015) investigated the significant relationship among three variables in
the Liberian economy, namely exports, imports, and GDP. The study results show
that imports cause a relationship between GDP and Exports. The results confirm that
GDP and Importshavebi- directional causality relationship and exports and GDP,
exports, and imports have a unidirectional causal relationship. Chabossou et al.
(2021) assessed the COVID-19 pandemic effect on the export performance of Benin.
The study results reveal that Micro, Small, and Medium Enterprises (MSMEs) are
very slow, and the export performance of companies dropped by 53.31 percent in
quarterly turnover in 2020 due to the COVID-19 crisis.

Moreover, the forecast results of the study show that the rate of change will remain
negative until 2021. Hussaini (2015) examined the testing of the hypothesis on the
export-led growth of India from 1980 to 2013. The study found that within 1980 the
select variables are co- integrated and a bidirectional relationship between GDP and
Export. Mohsen (2015) studied foreign trade and its impact on the economic growth
in Syria. The study results exhibit that GDP is positively and significantly impacts
exports and imports.

Moreover, it reveals that Imports have a higher impact on the GDP compared to
exports. Saaed and Hussain (2015) assessed the significant effect of foreign trade on
Tunisia's economic growth. The results show that exports and imports have a
unidirectional causality relationship. Moreover, exports and economic growth show
the same causality direction. Maliszewska et al. (2020) studied the potential effect
of an outbreak of pandemic on the World GDP and trade. The study revealed a rise
in the trade costs by 25% and, a decline in employment by 3%, a strident decline in
the hospitality, aviation, tourism, and recreation sectors. The global GDP declined to
3.9%, while the average GDP of developing countrieshit the highest, i.e., 4%, and in
some developing countries, GDP declined to 6.5% during the COVID-19 pandemic.
Rababah et al. (2020) conducted a study in China on the impact between the COVID-
19 outbreak and the financial performance of selected companies. The study results
confirm that severely negative impact on financial performance. This results in a
decrease in listed companies' overall revenue, profitability, and investment capacity.

61
 CHAPTER – 7

Prior studies in the Indian context

Agrawal et al. (2020) explored the impact of the COVID-19 outbreak in India and its
supply chain. The study results confirm that COVID-19 influences manufacturing
firms and their global supply chain, and the COVID-19 pandemic affects logistics and
daily manufacturing productivity in India. Banerjee (2020) studied enhancing
engineering exports of electrical machinery. The study results explored that India
must empower domestic manufacturers to expand the productivity, access the new
markets, and achieve, make it attractive for the global manufacturers to invest in
the country. This will enhance the value chain of India at the global level. Britto and
Santhiya (2020) examined the revival of 1930, when the worldwide economy has
encountered the most harmful recession are presently COVID-19 pandemic brought
an adverse impact on all the financial sanctions over the world. The unforeseen
decrease in economic activity due to the curfew is shocking throughout India.
Dhinakaran and Kesavan (April 2020) examined the exports and imports stagnation
during COVID-19 in India. The study results confirm that export and import of India
have been dormant during the COVID-19 pandemic lockdown. Gopalakrishnan and
Mahalakshmi (2018) studied the impact of India's foreign trade during the post-
liberalization era. The study confirms that total exports have shown significant
growth after implementing India's new economic policy in 1991. The overall growth
is unbounded, even though India faces acontinuous deficit in its balance of payment
and the volume of trade is increasing continuously, despite fluctuations in GDP
growth rate.

Kumar (2021) examined the COVID-19 pandemic on economic implications and

trade policy responses. The results show that India's foreign trade progress is
relatively low compared to other nations in ASEAN. Therefore, it is difficult to
recover from the economic crisis in the global market. Parth (2020) examined the
effect of COVID-19 in various Indian Industries. The study revealed that Tourism
Aviation is the seriously affected sector.

62
Moreover, a negative impact has been seen in the significant GDP contributing
sectors like MSME, textile, automobile, etc. Rai and Jhala (2015) studied the
dependence of growth profile on exports and imports during the economic reform
period. The results show asignificant positive association between growth profiles of
exports. A study by Singhal (2020) examined the COVID-19 pandemic crisis on the
policy priorities in India's foreign trade. It explored to reduce the cost, promote
cooperation, and reduce trade barriers on goods and services to recover both the
supply and demand sides. Sahoo and Ashwani (2020) studiedthe impact of the
COVID 19 pandemic on the Indian economy by assessing MSMEs' growth. The study
results show that the outbreak had a severe impact on the growth of MEMEs;nearly
3-7 percent of negative growth was in 2020. Sutradhar et al. (2020) examined the
effect of the COVID-19 on Indian foreign trade. It emphasizes the negative impact of
this pandemic. There has been a massive contraction in exports and imports,
primarily when strict lockdown has been enforced in many countries. Virmani and
Bhasin (2020) studied the Indian economy and its growth during the COVID-19
pandemic. The study's findings reveal that there was an enormous decline in the
demand and supply of goods and services due to the lockdown measures taken by
the Indian government. The summary of the literature review is presented in Table 1

63
Table 1. Summary of Literature Review

64
65
66
Research gap and study Objectives

The literature review on foreign trade and GDP has revealed the existence of a
significant relationship among three major economic variables, namely imports,
exports, and GDP, in the ordinary course of the period. Examining the relationship
among them in the pandemic is considered a research gap for this study. Therefore,
the following objectives are formulated.

 To study the growth of agricultural and non-agriculture commodities of

India's foreign trade during the COVID-19 pandemic.

 To find the causal relationship between exports, imports, and GDP during
the COVID- 19 pandemic.

Research methodology

The current study is carried out with the secondary data collected from World
TradeOrganization published reports, economic survey of India and database of
Department ofCommerce, Government of India. The Granger causality test has been
employed for testingthe causal relationship between exports, imports, and GDP
during the COVID-19 pandemic.

Data analysis and results

The data collected during the COVID-19 pandemic was analyzed on the dimensions
of agricultural and non-agricultural imports and exports of India and also applied a
Granger causality test to find the significant relationship among three major
economic variables, namely the GDP, imports, and exports.

Total imports and exports performance of India during COVID-19 pandemic

Table 2 represents the growth of imports and exports of India during the COVID-19
pandemic. The results reveal that exports and imports have drastically declined due
to the global pandemic and economic lockdown in India. Somehow it is recovered
gradually but notas it was before the pandemic.

67
Trends of major exports of agricultural products

The growth rate of agricultural exports during the COVID-19 pandemic is presented
in table.

68
3. The results show that the export performance of rice, meat, cane or beet sugar
essential oils, and cotton are the top 5 exporting commodities of agricultural
products of India. All thesesignificant commodities have shown a declining trend in
March and April and started torise in May till July, and again there was a declining
trend. From this analysis, it is clear that export performance in cotton is positive,
whereas the other commodities are affected seriously because of the lockdown.

69
70
71
72
Causality test between exports, imports, and GDP

Stationary test

The present study examined the Granger causality analysis between three economic
variables and hence a stationary test is conducted to trace out the integration order
for the selected economic variable. Augmented Dickey-Fuller (ADF) and Philips-
Perron (PP) unit root tests are administered to test the integration level and
ascertain the possible cointegration between variables. The variables, namely log
values of GDP, imports, and exports, have been considered for the unit root test.
The unit root test results show that the null hypothesis of unit root is rejected for
the first difference statically significant at 1 percent level. The results confirm that, If
the null hypothesis is rejected, that indicates variables are in stationarity form and
further no issues for further analysis. The unit root test results are presented in
Table 7.

73
74
Conclusion and policy implications

The present study examines the current performance of India's imports and exports
of both agricultural and non-agricultural commodities in the theCOVID-19 outbreak.
The study results found that major trading commodities have declined in the COVID-
19 pandemic. The study reveals that the export and import of non-agricultural
commodities are affected severely due to the protection shutdown compared to the
export and import of agricultural commodities. The study also found a bidirectional
causality relationship between India's GDPand imports. A similar result is reported
by (Andrews, 2015;Bakari & Mabrouki 2016; Bakari & Mabrouki,2017; 2015; Rentala
&Nandru, 2019;Uğur, 2008). It implies that imports are much higher than exports in
the pandemic, which causes an effect on the country's GDP. The government of
India may bring potential policy initiatives to overcome the economic crisis due to
the Covid-19 outbreak. Therefore, the government has to revise the economic
policies to overcome the problems for possible economic growth.

The COVID-19 pandemic is one of the rare historical events, but the effect
of the outbreak is severe in terms of human lives and economic progress around
the world. Due to lockdown restrictions imposed by the governments to stop the
spread of COVID-19 effects, all nations are in an enormous economic crisis. Hence,
policymakers may propose potential policies to boost economic growth to overcome
this unexpected disruption, especially in global trade. Thus, special initiatives have
to be considered by the policymakers in pandemicsfor sustainable economic
development. The policymakers may adopt special promotion schemes for the
export of specific commodities affected in the pandemic period through the
reduction in excise and customs duties and facilitate pre and post-shipment finance.
Besides, production in the domestic territory can be retrieved by administering
industry-specific special recovery package for those who had severe financial loss
due to production shutdown to enhance the exports and reduce the imports. These
policy decisions will positively grow the economy in the post-COVID-19 pandemic
scenario.

75