GDP contraction shrinks to 7.5%, CEA says 'encouraging'

Chief Economic Adviser (CEA) Krishnamurthy Subramanian on Friday described the narrowing of GDP contraction to (-)7.5 per cent in the second quarter of FY21 as "encouraging" in the backdrop of the Covid-19 pandemic.

Addressing the media through a video conference, the CEA said that the severe economic impact during the first quarter (April-June), which witnessed a massive contraction of 23.9 per cent, came largely on the back of the nationwide lockdown.

"Compared to Q1 figures and given the Covid-19 pandemic, the Q2 GDP numbers are quite encouraging," he said.

He added that the GDP estimates are more encouraging than anticipated by most economic commentators.


Given the advent of the winter season, and a likely spike in Covid cases, he said: "However, I would urge caution, especially during the winter months."

Citing growth in FDI and FPI inflows, Subramanian said that the external sectors reflect that India is going to be one of the "bright spots" going forward.

He noted that recovery was reflected in corporate, manufacturing and electricity sectors, while mining has not recovered yet.


Data on user industries, including consumer durables, non-durables, capital goods and investment goods, showed a V-shaped recovery during July-September.

In a presentation, he said that the outlook for the economy is "cautiously optimistic".

As economic impact is primarily due to the pandemic, sustainability of the economic recovery depends critically on the spread of the pandemic.


Till the pandemic does not go away, some of the sectors that are affected by social distancing will continue to experience demand slump, he said.

"Overall, while recovery provides optimism, caution over the pandemic and therefore on the economy is still warranted," said the presentation. - IANS