Chief Economic Adviser, KV Subramanian, believes the economy will not be taking a brunt of the third wave of Covid-19 infection surge, if there is one.

In an interview with the Economic Times, the CEA has made some optimistic statements about the present and immediate future of the Indian economy.

When asked how third wave would affect the economy, he said, “Considering the pace of vaccination and high seropositivity rate, the impact of a third wave, if any, many’t be high. Also, the (economic) template that was generated during the second wave in terms of restrictions etc. can be implemented once more.”

He continued, “For example, there was no national lockdown during the second wave though there was a clamour for it. So, the economic impact of a third wave, if it strikes, will be very limited. It is important to understand that had there been a national level lockdown during the second wave, 20% growth would not have been possible.”

And, according to him, there is plenty of reason to be hopeful, “If you compare Q1 export numbers of the current fiscal with that of pre-pandemic 2019-20, there was a growth of about 8%. Also, if you look at the manufacturing and construction sector, the numbers are close to the pre-pandemic level,” said he.

“It is reflected in the Purchasing Managers’ Index (PMI) (an index of economic trends in manufacturing and service sectors),” he said. According to him, one can see robust trends in manufacturing sector PMI since September 2020. He is of the opinion that the industry as a whole has recovered well. He is concerned, however, in the case of contact-intensive services sectors (where social distancing is imperative), where the recovery has been slow.

“If you compare the macro fundamentals after the global financial crisis (2008) and now, there has been a sea change. Even if there were no supply side restrictions (lockdown etc.) then, the inflation was in double digit. Now, despite so much supply side disruptions, the inflation in the last 16-17 months has been on an average 6%,” he goes on.

KV Subramanian is of the opinion that, had there been no second wave, the Q1 growth rate could have been around 30%.

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