The coronavirus pandemic has caused an exogenous shock to India, but “the worst is behind us” and economic recovery “is clearly on”, Chief Economic Adviser Krishnamurthy Subramanian told NDTV on Tuesday. His remarks, in an exclusive interview to NDTV, come a day after official data showed the country’s gross domestic product (GDP) contracted a record 23.9 per cent in the quarter ended June 30, as the coronavirus pandemic-triggered lockdowns damaged an already-slowing economy. (Also Read: What GDP At -23.9% Means For India)

The GDP reading was along the expected lines, he said, describing the pandemic as “clearly an exogenous shock” to the economy. During this quarter (April-June), the entire globe was in lockdown, and India had a very intense lockdown, which placed significant restrictions on economic activity, he said.

Consumer spending, private investments and exports all collapsed during the world’s strictest lockdown imposed in late March to curb the spread of COVID-19.

India, which until a few years ago was the world’s fastest-growing large economy – appears to be headed for its first full-year GDP contraction since 1980. Some economists have estimated a GDP contraction of nearly 10 per cent for the year ending March 2021.

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

He, however, asserted that the economy is on the path of recovery from the coronavirus-induced situation. “It is important to keep in mind also is that a recovery is clearly on,” Mr Subramanian said. 

“What’s important is that in a period of extreme uncertainty like this, you have to take it step by step as it is very hard to predict what the full-year number would be… Going forward, there is no doubt that the numbers will be better,” he said.

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

Core sector output has improved gradually since April, clearly indicating “a sharp fall and then a recovery (V-shape)”, he said. Mr Subramanian was referring to the output of core sectors – coal, oil, gas, refinery products, fertilisers, steel, cement and power – which crashed a record 38.1 per cent in April, but has recovered gradually ever since (-23.4 per cent in May, -15 per cent in June and -12.9 per cent in July).

“Looking at all these indicators, clearly the recovery is on and the worst is behind us,” the Chief Economic Advisor said.

“I am speaking based on data that I am seeing… In a V-shaped recovery, it is possible that the slope (of rise) actually may not always be the same exactly as that of the fall, which is a drastic one,” he said, responding to criticism against the prospect of a “V-shaped” recovery in the economy. “There is clearly a recovery after the significant decline. I am speaking based on data, not giving opinion,” he said.

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

“Hindsight of course is 20/20, but decisions have to be made with foresight, not hindsight… Given the intensity of the lockdown and the economic restrictions that there were, GDP contraction is not unexpected,” he added.