Addressing the media after the announcement of the GDP numbers, Chief Economic Adviser K.V. Subramanian said that the slump in the economy has been in line with the global economy as it is going through a “once in a one and half century” event.
India reported a 23.9% contraction in GDP for the first quarter of FY 2020-21 on Monday.
According to Subramanian, the negative growth rate in GDP was in expected lines as India went through a complete lockdown during the April-June quarter as other countries.
“India was also in a lockdown all through the April to June quarter with the majority of economic activities being restricted. This drift is along expected lines,” he added.
The country had observed mobility restrictions as mandated under the lockdown measures for the better part of the first quarter of FY21. It was only on June 1 that partial unlock measures were implemented.
“As the world economic outlook has highlighted the fraction of countries where the GDP per capita would decrease is the highest since 1870. So once in one and a half century event which is what we are going through,” the CEA said.
To state the fact that Indian lockdown was 15% more stringent than in the UK, Subramanian also read the Oxford University Index “The UK contracted by 22% and given the higher intensity, the GDP contraction in India is on the expected lines,” he said.
The Chief Economic Adviser also said that the lockdown caused a fall in the economy but India is experiencing a V-Shaped recovery with the unlock.
He stated that the core sector growth, which declined by 38% in April, progressively reduced the decline to 22% in May, 13% in June and 9.6% in July. Similarly, railway freight traffic which is a good indicator of economic activity, stood at 95% of the previous years levels in July and in August it has actually grown by 6% in first 26 days of the month. E-way bill in August is also almost the same as last year at 99.8% despite some local lockdowns.
He further added, “So overall there is clearly a V-shaped recovery. Agriculture sector, which has grown by 3.4%, is reflective of the several reform measures announced by the government. Rural inflation is higher than urban inflation, which captures that rural demand is picking up,”
He also said, “In sum, this decline is expected given the lockdown which happened globally and India is definitely experiencing a V-shaped recovery. So we should expect better performance in subsequent quarters,”
Chandrajit Banerjee, Director General, Confederation of Indian Industry (CII) said, “Large contraction in the first quarter GDP print for the current fiscal at -23.9 per cent was widely expected, and it reflects the wide-spread stalling of economic activities due to the stringent lockdown in response to the pandemic.”
Notably, State Bank of India had expected India’s GDP to contract 16.5 per cent in the April-June quarter in its earlier Ecowrap report in May.
Subramanian mentioned India will have to do what it takes to bring back growth and consumption.