Worst Is Over, V-Shaped

Recovery is on” With GDP contracting 24 per cent in first quarter, economic recovery will be a long and painful process. Business Today’s Rajeev Dubey, Dipak Mondal and Joe C. Mathew caught up with Chief Economic Advisor Krishnamurthy Subramanian on the state of the economy and plans to put it back on track. Edited excerpts:

What is your view on Q1 GDP numbers?

This is because of exogenous shock globally. If you look at the World Economic Outlook report, the fraction of countries whose GDP per capita will contract this year is the highest since 1870.

Despite that, the impact on our economy has been the severest.

The intensity of our lockdown was very severe. The Oxford University, for instance, maintains that India had the most intense lockdown by far. There was complete lockdown in April and May. We started some unlocking on June 1. We have had such a severe fall due to the intense lockdown in April and May. The effects persisted in June.

Would you attribute the fall only to that? Or would you accept that coronavirus hit us at the weakest moment as we were decelerating for 16 quarters?

Given our Q4 growth rate, we were still growing faster than the advanced economies. So, it can’t be because of the deceleration preCovid. It is clearly an exogenous shock.

We are seeing a 10-12 sigma event. Just to give you one parallel, the United Kingdom, and I am taking this example because the size of its economy is the same as ours, shrunk by 22 per cent in the June quarter. We had a far more intense lockdown than the UK.