KV Subramanian, chief economic advisor to the government, on Monday, maintained that the overall economic impact of the second wave is unlikely to be “very large”, assuming that Covid-19 cases peaked by 8 May.
However, the CEA did not quantify the impact of the pandemic nor did he comment on whether India will grow in double or single digits in the current fiscal. He pointed out that the trajectory of the pandemic is uncertain.
He noted that experts are talking about the “possibility of a third wave”, the scale and impact of which is not known. Subramanian, in a virtual press conference, after India released the full-year GDP numbers for 2020-21, stated that “The economic impact is inextricably linked to the overall path of the pandemic itself,”.
He added that “We do think that the overall economic impact of the second wave is not likely to be very large. Given the uncertainty about the pandemic, it will be very hard to give you actual numbers,”.
As per the Economic Survey forecast the Indian economy will grow at 11 per cent and according to the Union Budget the economic growth can be around 10 per cent for its budget calculations.
According to the recent data released by the government, the Indian economy contracted by 7.3 per cent in 2020-21. Additionally the economy grew by 1.6 per cent in the fourth quarter, strongly indicating that economic recovery had begun before the second wave again adversely impacted the economy.
Articulating his opinions on the uncertainty surrounding the pandemic, Subramanian stated that compared to last year, when the pandemic was “unknown unknown”, this time it is the “known unknown”. This means that different stakeholders are better equipped to handle it this time around as seen by the resilience of many economic indicators.
Talking about the need for a robust vaccination campaign, the CEA cautioned that given the “speed and the scale of the second wave”, there is an urgent need to contain the spread of the pandemic.
He stated that “Vaccination and strict observation of Covid-appropriate behavior cannot be overemphasized,”.
“I think vaccination… is important not only for the health of the people but also for the health of the economy,” he stated. He added that the government remains committed to “procuring supply and accelerating the pace of the vaccination programme”.
Talking about the possibility of the government announcing further measures or a stimulus, Subramanian maintained that the Budget presented in February was “expansionary” in nature. Thus, the impact of the growth-oriented budget will be felt in the coming months as states remove their lockdown related restrictions.
Government measures
So far, the government and the Reserve Bank of India (RBI) have been working together to provide relief to the covid battered economy. They recently announced some supporting measures to sustain the economy. The RBI enabled easy access to finance for the healthcare sector besides providing relief to individuals and small firms from loan repayments.
Additionally, on Sunday, the government announced that sectors like civil aviation which are the worst hit due to pandemic related restrictions will be able to access government guaranteed loans under the emergency credit line guarantee scheme.