New Delhi: The overall economic impact of the second wave is unlikely to be “very large”, assuming that Covid-19 cases peaked by 8 May, K.V. Subramanian, Chief Economic Adviser (CEA) to the Government of India said Monday.
However, he did not quantify the impact or comment on whether India will grow in double or single digits in the current fiscal, pointing 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.
“The economic impact is inextricably linked to the overall path of the pandemic itself,” Subramanian said in a virtual press conference after India released the full-year GDP numbers for 2020-21.
“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,” he said.
He pointed out that the estimates made in both the Economic Survey 2021 and the Union Budget were relatively conservative.
The Economic Survey had forecast that the Indian economy will grow at 11 per cent and the Union Budget had pegged this growth at around 10 per cent for its budget calculations.
The Indian economy contracted by 7.3 per cent in 2020-21, data released Monday showed, with the economy growing by 1.6 per cent in the fourth quarter, indicating that economic recovery had begun before the second wave again adversely impacted the economy.
Vaccination important for health of economy
Subramanian said that compared to last year, when the pandemic was “unknown unknown”, this time it is the “known unknown” meaning that different stakeholders are better equipped to handle it this time around as seen by the resilience of many economic indicators.
However, he cautioned that given the “speed and the scale of the second wave” and given the fact that the economy is still recovering from last year’s impact, there is an urgent need to contain the spread of the pandemic.
“Vaccination and strict observation of Covid-appropriate behaviour cannot be overemphasised,” he said.
“I think vaccination… is important not only for the health of the people but also for the health of the economy,” he said, adding that the government remains committed to “procuring supply and accelerating the pace of the vaccination programme”.
Subramanian said continued monetary and fiscal policy support will continue to be important going forward.
On the possibility of the government announcing further measures, Subramanian said that the Budget presented in February was “expansionary” and the impact of that will be felt in the coming months as states remove their lockdown related restrictions.
So far, the government and the Reserve Bank of India (RBI) have announced some measures to support the economy. The RBI enabled easy access to finance for the healthcare sector besides providing relief to individuals and small firms from loan repayments.
The government also announced Sunday that sectors like civil aviation which are badly hit due to pandemic related restrictions will be able to access government guaranteed loans under the emergency credit line guarantee scheme.