“The worst is behind us, the recovery is clearly underway”

The coronavirus pandemic has had an exogenous impact on India, but “the worst is over” and the economic recovery “is clearly underway,” chief economic adviser Krishnamurthy Subramanian told NDTV on Tuesday. His comments, in an exclusive interview with NDTV, come a day after official data showed the country’s gross domestic product (GDP) contracted a record 23.9 percent in the quarter ending June 30. , as closures triggered by the coronavirus pandemic damaged a country that was already slowing down. economy. (Read also: What GDP means at -23.9% for India)

The GDP reading was on the expected lines, he said, describing the pandemic as “clearly an exogenous shock” to the economy. During this quarter (April-June), the whole world was blocked and India had a very intense blockade, which imposed significant restrictions on economic activity, he said.

Consumer spending, private investment and exports collapsed during the world’s toughest lockdown imposed in late March to slow the spread of COVID-19.

India, which until a few years ago was the world’s fastest-growing large economy, appears to be heading for its first full-year GDP contraction since 1980. Some economists have estimated a GDP contraction of almost 10% for the year that ends in March 2021..

“Just to give you a fact: if you look at the fraction of countries where the (proportion) of GDP per capita is going to drop … that fraction will be the highest for the first time in 150 years. The last time this happened was in 1870, “said the Chief Economic Advisor to the Ministry of Finance.” In other words, we are experiencing an event that occurs once in the kind of event of a century and a half, “he said.

However, he stated that the economy is on the way to recover from the coronavirus-induced situation. “It is important to note also that the recovery is clearly underway,” Subramanian said.

“The important thing is that in a period of extreme uncertainty like this, you have to go step by step, since it is very difficult to predict what the number would be for the whole year … In the future, there is no doubt that the numbers will be better, “he said.

In August, some of the key indicators, such as E-Way bills, energy consumption, cement, steel and rail freight, returned to almost the same levels recorded in the corresponding period last year, it said.

Central sector production has gradually improved since April, clearly indicating “a sharp decline and then a (V-shaped) recovery,” he said. Subramanian was referring to the production of the core sectors (coal, oil, gas, refinery products, fertilizers, steel, cement and energy) which plummeted a record 38.1% in April, but has gradually recovered since then ( -23.4% in May, -15 percent in June and -12.9 percent in July).

“Looking at all these indicators, clearly the recovery is underway and the worst is over,” said the Chief Economic Advisor.

“I’m talking based on the data I’m looking at … In a V-shaped recovery, the slope (going up) may not actually always be exactly the same as that of the fall, which is drastic,” he said. , responding to criticism against the prospect of a “V-shaped” recovery in the economy. “There is clearly a recovery after the significant drop. I speak based on data, not opinion,” he said.

When asked if the less severe lockdown restrictions could have limited the impact on the economy, Subramanian said: “This is something that health experts are best to answer. According to research by epidemiologists that I have read, the impact of a pandemic can be much bigger in a country like India, with a population of almost 1.4 billion and the kind of population density it has. “

“Hindsight, of course, is 20/20, but decisions must be made with foresight, not hindsight … Given the intensity of the blockade and the economic restrictions that existed, the contraction in GDP is not unexpected,” he added.