Growth narrowed down due to intense lockdown, V-shaped recovery on its way, says Chief Economic Adviser

Aditya Hore

NEW DELHI, Sept 1: The Chief Economic Adviser K V Subramanian on Monday looked forward to a better economic performance by the country from the current and the subsequent quarters pointing out that India recorded 23.9 percent contraction in GDP in April-June due to the coronavirus lockdown but aided by a ‘V-shaped’ recovery in various sectors, the country would witness better performance in the subsequent quarters,

“Rail freight traffic and electricity consumption are the various indicators which are pointing to a recovery in economic activity” said the CEA.

“Given the intensity of the lockdown…higher intensity, this (growth number) is actually along the expected lines. What is important is that India is experiencing a V-shaped recovery after the unlock has been announced”, he added.

By giving few examples, he said, railway freight traffic, which is often a good indicator of economic activity, has reached 95% of the level seen in July last year and was 6 percent higher in the first 26 days of August, compared to the same time in the previous year.

Power consumption is just 1.9 percent lower than last year, he said.

“E-way bills capture interstate trade, which do get affected by local lockdowns and yet the e-way bills are at 99.8 percent in August so far,” he said.

Moreover, talking about the eight core infrastructure sectors, he said core sector output declined by 38 percent in April, but since then the rate of contraction has come down to 22 percent in May, 13 percent in June, and 9.6 percent in July.

“Overall, there is clearly a V-shaped recovery. One noteworthy point is that the agriculture is one sector that has grown at 3.4 percent despite the lockdown that was in Q1…. (this) is reflective of the several reform measures that the government has announced, like the APMC reforms and Essential Commodities Act etc,” he said.

Further, he added, this had also reflected in rural inflation now becoming higher than urban inflation.

As per data released by the National Statistical Office (NSO) amid the coronavirus crisis, India’s GDP shrank by the steepest ever 23.9 percent in April-June, as against a growth of 5.2 percent in the same quarter of the last fiscal.

“This decline is expected given the lockdown globally that happened and India is definitely experiencing a V-shaped recovery. So, we should expect better performance in the subsequent quarters,” Subramanian emphasized.

Analyzing and comparing the contraction with the UK economy, the CEA said India’s lockdown was more intense than that in the UK, which witnessed 22 percent decline in the April-June quarter.

He also quoted the World Economic Outlook by the International Monetary Fund which had highlighted that GDP per capita would decrease the highest since 1870 and said this was a once in one-and-a-half century event which is what India was going through as well.

As per the NSO data, the construction sector GVA contracted by a whopping 50.3 percent from 5.2 percent expansion earlier. Mining sector output declined at 23.3 percent, as against a growth of 4.7 percent a year ago.

Accordingly, trade, transport, communication, hotel and services related to broadcasting declined 47 percent in the first quarter from 3.5 percent growth earlier. Gas, water supply, electricity, and other utility services segments too shrank by 7 percent in the first quarter of 2020-21, against 8.8 percent growth a year ago.