people engage in voluntary social distancing in response to concerns about the virus. this phase has generally lasted a couple of months. as infection rates fall and activity restrictions are eased, activity begins to recover quite quickly over the course of the next few months. graph 1 the phase of rapid recovery is usually only partial, however. with a few more months behind us, it has become clear that activity has not fully returned to pre - outbreak norms. this is apparent from data on the movement of people ( graph 2 ; graph 1. 2 in the smp ), and in more conventional economic indicators and surveys. graph 2 there are a number of reasons why activity is unlikely to bounce back completely after lockdowns end. firstly, some activity restrictions usually remain even after the most stringent lockdown measures are lifted. secondly, some people continue to engage in some social distancing beyond what is mandated. thirdly, and probably most importantly, the deficiency in demand and a general increase in uncertainty induces people and firms to be more cautious in their spending decisions. so demand remains weak for some time. this lingering effect of the pandemic on uncertainty and demand means that, beyond the first couple of months, recoveries will be protracted and uneven. it will take time to get back to the level of global gdp prevailing before the pandemic. taking 2020 as a whole, global gdp is expected to contract by more than 4 per cent, before rising by nearly 6 per cent in 2021. if realised, this outcome would still leave gdp below where it would have been had the outbreak not occurred. the pattern is very similar for australia's major trading partners, though the contraction occurred earlier and the recovery is expected to be a bit more vigorous in china than in our other major trading partners ( graph 3 ; graph 1. 7 in the smp ). graph 3 in australia, the story is fairly similar ( graph 4 ; graph 6. 1 in the smp ). we estimate that activity contracted severely in the june quarter of this year, but began to recover late in the quarter. the situation in victoria will reduce growth in the september quarter and push out the recovery beyond that. that said, activity is expected to continue to recover in much of the country over the rest of this year and next. the recovery is expected to be slow and uneven, and gdp will probably take several years to return to the trend path expected prior to the virus outbreak. graph 4 a contraction in demand

. how do we in india fare in corporate governance in the financial sector? i am told that there are number of models of corporate governance – ( a ) the “ outsider ” model of the u. s. and u. k. type where there is separation of ownership and management ; and ( b ) the “ insider ” model – as in europe or asia, where a small group of inter - connected shareholders exercise control over management. east asian model is more family oriented while european model involves inter - connected entities. in the “ insider ” model, it is difficult to distinguish between shareholder and management respectively. in india, in the financial sector, we now have all the three varieties with certain important differences with the u. s., europe or asia. public sector banks / fis, for example, are more akin to the ‘ outsider ’ model with separation of “ ownership ’ and ‘ management ’. private sector banks / nbfc / co - ops – much more “ insider ” models with families, inter - connected entities or promoters running the management. there is some uniformity in the corporate governance structure in the “ outsider model ” consists of relatively large public institutions, and which are also relatively old. on the positive side : ( a ) difference in ‘ ownership ’ and ‘ management ’ ; ( b ) disclosure and transparency ( with one or two exceptions ). they are also becoming subject to better accounting standards ; ( c ) prudential norms – capital adequacy ratio ( car ), provisioning, rec. norms are fairly good. because of sovereign risk, money is also safe with one - two aberrations. on the negative side : ( a ) there is separation of ‘ ownership ’ and ‘ management ’, but no checks and balances. ceo as well as the board is appointed by the owner, i. e government ( b ) very little accountability to the board as board cannot remove the chairman ; ( c ) substantial limitations on management as staff issues are outside the purview of management ; ( d ) weak on internal auditing and risk management. the crucial issue that the country has to debate is whether corporate governance is compatible with public ownership, which makes the system accountable to political institutions and not to the economic institutions or even regulators. this is a big and fundamental issue which our country has to debate and decide. is a “ via media ” possible? could we have public ownership without government or political control or do we need to change to a corporate structure?