‘Need a cautious approach to sustain growth’, says Krishnamurthy Subramanian

The pace of contraction in GDP slowed in the September quarter to 7.5% from the devastating 23.9% contraction in the June quarter. This was aided by a rebound in manufacturing and electricity generation as well as sustained farm output.

India’s economy is on the road to recovery, especially in the manufacturing sector, but given the uncertainty surrounding the pandemic, it makes sense to remain cautiously optimistic, chief economic adviser (CEA) Krishnamurthy Subramanian said on Friday.

Subramanian said it would be difficult to forecast whether the economy will grow in the third or fourth quarter because of the uncertain nature of the pandemic.

The pace of contraction in GDP slowed in the September quarter to 7.5% from the devastating 23.9% contraction in the June quarter. This was aided by a rebound in manufacturing and electricity generation as well as sustained farm output.

The services sector, however, remained a drag on the overall economy. Subramanian said it would be difficult to forecast whether the economy will grow in the third or fourth quarter because of the uncertain nature of the pandemic. More recent indicators in October showed that the economy clearly was in an expansionary phase. The PMI for October suggested that the economy was in an expansionary phase in both manufacturing and services, the CEA said.

Also, rural jobs asked for and given under the MGNREGS, a demand-driven scheme, which peaked in May and June, has subsequently declined, he added.

“Until the pandemic goes away, some of the sectors that are affected by social distancing will continue to experience a demand slump. Overall, while recovery provides optimism, caution on the pandemic and, therefore, on the economy, is still warranted,” he said.