New Delhi: A nascent recovery in India’s economy faces “unknown” risks from the coronavirus outbreak, according to a top government adviser.
“There are some green shoots, but I would be cautiously optimistic,” Krishnamurthy Subramanian, the chief economic adviser said in an interview in New Delhi on Monday. “There are known unknowns and unknown unknowns. It’s hard to model unknown unknowns.“
The virus epidemic is seen curbing growth in China and the global economy, which will weigh on India’s outlook at a time when the government is forecasting a rebound. Asia’s third-largest economy will likely expand at 6%-6.5% in the year beginning April, an improvement from an estimated 5% this year, Subramanian wrote in a report last month.
The virus “creates some uncertainty, especially in China,” Subramanian said Monday, adding that it’s difficult to quantify the impact of the epidemic.
Recent purchasing managers surveys for manufacturing and services as well as industrial output data indicated some recovery in India after six straight quarters of decelerating growth. That optimism was tempered by a central bank survey that showed worsening consumer sentiment.
“It’s quite likely that we might have bottomed out,” Subramanian said. “I would wait for it to develop in a trend as sometimes these indicators can be volatile.”
The Reserve Bank of India last week left interest rates unchanged amid high inflation, while adopting unconventional policy tools to lower borrowing costs.
The central bank also flagged risks to tourist arrivals and global trade from the spread of coronavirus, which has already claimed more than 1,000 lives around the world.
The spread of the coronavirus will cost the world economy more than $280 billion in the first three months of the year, putting an end to a 43-quarter global growth streak, according to Capital Economics Ltd.
“I would watch the coronavirus situation,” Subramanian said. “If you go by SARS episode that’s something you can draw lessons from. India wasn’t impacted that much. That’s what I would expect.” – Bloomberg