Increasing concerns of a major economic recession in Asia amidst the Coronavirus pandemic, foreign investors have pulled out an estimated $26 billion from developing Asian economies and over $16 billion out of India, an independent Congressional Research Center said in its latest report on global economic effects of COVID-19.

In Europe, over 30 million people in Germany, France, the UK, Spain, and Italy have applied for state support, while first quarter 2020 data indicates that the eurozone economy contracted by 3.8 per cent, the largest quarterly decline since the series started in 1995, it said.

In the US, preliminary data indicated that the GDP fell by 4.8 per cent in the first quarter of 2020, the largest quarterly decline since the fourth quarter of 2008 during the global financial crisis, the CRS said.

According to CRS, the pandemic crisis is challenging governments to implement monetary and fiscal policies that support credit markets and sustain economic activity, while they are implementing policies to develop vaccines and safeguard their citizens.

In doing so, however, differences in policy approaches are straining relations between countries that promote nationalism and those that argue for a coordinated international response.

Differences in policies are also straining relations between developed and developing economies and between northern and southern members of the eurozone, challenging alliances, and raising questions about the future of global leadership, the report said.

Amid growing concern across the world that Chinese companies are buying cheap, distressed assets hit by the Coronavirus pandemic, India, last month, reviewed the extant Foreign Direct Investment (FDI) policy for curbing opportunistic takeovers/acquisitions of Indian companies.

With the amendment, an entity of a country, which shares a land border with India or where the beneficial owner of investment into India is situated in or is a citizen of any such country, can invest only under the Government route.

Until before the new arrangement was made in the policy, the curb on FDI was only on Pakistan and Bangladesh as a citizen of Bangladesh or an entity incorporated in Bangladesh can invest only under the Government route. Further, a citizen of Pakistan or an entity incorporated in Pakistan can invest, only under the Government route, in sectors/activities other than defence, space, atomic energy and sectors/activities prohibited for foreign investment.

This change has brought China in the ambit of ‘government permission’ before investing in any sector in the country.

China had slammed the move saying New Delhi is “against liberalisation”.

China claimed that India’s new rules for FDI “violate WTO principles of non-discrimination and are against free and fair trade”. It further called for a “revision of discriminatory practices”.

However, the Indian government has said that it is “not denial” of permission but only an approval process, which is in no way a violation.

Meanwhile, according to the Congressional report, while almost all major economies are shrinking as a result of Coronavirus, only three countries China, India, and Indonesia are projected to experience small, but positive rates of economic growth in 2020.

(With PTI inputs)