India’s Chief Economic Advisor (CEA) KV Subramanian today said that the second wave of coronavirus has affected the momentum of economic recovery. However, Subramanian also noted that he expects a recovery in the economy from July onwards.
Speaking to news agency ANI, Subramanian said, “The second wave of COVID-19 has affected the momentum of economic recovery. We expect a recovery in the economy from July. Now, several states have started removing many restrictions and if we speed up the vaccination drive in our country, our economy will start recovering.”
The economist also spoke about the ongoing coronavirus vaccination campaign in India. He said, “India will be able to achieve vaccination for all by December. If we vaccinate people in three shifts each day, then, we can vaccinate 1 crore people in a day. This is definitely ambitious, but not impossible. I have taken both doses of vaccine and appeal to all to get themselves vaccinated as soon as possible.”
Amid strict lockdowns imposed in almost all parts of the country, Moody’s Investors Service said that India’s economy will rebound in the current fiscal ending March 2022 and clock a growth of 9.3%.
“India’s economy rebounded quickly from a steep contraction in 2020, but a severe second wave of the coronavirus has increased risks to the outlook with potential longer-term credit implications. Risks to India’s credit profile, including a persistent slowdown in growth, weak government finances and rising financial sector risks, have been exacerbated by the shock,” Moody’s said.
Meanwhile, SBI, the country’s largest public lender, recently slashed its FY22 growth forecast.
On Covid-19 third wave
When asked about the third wave of coronavirus, the CEA said that the ongoing vaccination programme can significantly ‘lower down’ the impact of the pandemic. “Thus, the more people are vaccinated, the more it will lower down the impact of the third wave and will not be as harmful as expected”, he said.
The CEA stated that coronavirus is not going to impact our fiscal deficit target and disinvestment target.
In this year’s Union Budget, Finance Minister Nirmala Sitharaman has announced a fiscal deficit target of 6.8% for 2021-2022. The government has set ₹1.75 lakh crore disinvestment target from stake sale in public sector companies and financial institutions, including 2 public sector undertaking (PSU) banks and one insurance company, in the next fiscal year.
Answering a question of whether the government is thinking of any new stimulus package like last year, he said, “There was not any provision of a pandemic in last year’s Union budget, because we have seen the pandemic after the last year Union budget. This year, the budget has a provision for the pandemic. The budget has the provision of expenditure in the infrastructure and construction sector.”
“Amid this pandemic, India has not spent much on infrastructure and construction. As and when the situation improves, govt will start spending as per the provision of the budget. The government is also assessing the situation. If required, the Centre is ready to do so,” he said.
Commenting on the stock market situation in the country, he said that the stock market is at a record high as investors believe that the Indian economy will do well.
The CEA said that the prediction of good economic growth and investment by developed nations in the Indian stock market has led the market to a record high.