As official data released on Friday showed the country's GDP shrank 7.5 per cent in the July-September quarter, Chief Economic Advisor KV Subramanian on Friday said the latest estimates are more encouraging than what was anticipated by most commentators. However, he urged for caution in the coming months. "Uncertainty in the economic outlook is due to the COVID-19 pandemic and therefore I would urge caution especially given winter months," Mr Subramanian said.
Though the contraction of 7.5 per cent is a rebound from the earlier quarter, when the economy had shrunk a record 23.9 per cent, the current contraction has caused the country to hit technical recession for the first time. "Indian economy had picked up momentum by February 2020, only to be halted by COVID-19 outbreak. The Q1-GDP contraction was primarily due to the stringent lockdown," he said.
Mr Subramaniam mentioned that a V-shaped recovery in growth could be spotted across sectors with "capital and infrastructure sectors especially encouraging".
"There is a V-shaped growth pattern in all major sectors today. Consumer durables, capital and infrastructure look very encouraging. Food Inflation is expected to soften in Q3," he said.
During the July-September period, trade, hotels, transport and communication saw a dip of 15.6 per cent, whereas public administration, defence and other services declined 12.2 per cent. The financial, real estate and professional services sector contracted 8.1 per cent, whereas construction fell 8.6 per cent.
Some sectors have bounced back with resumption of economic activities. The electricity, gas, water supply and other utility services have shown a growth of 4.4 per cent; agriculture, forestry and fishing sector at 3.4 per cent and manufacturing sector showed a marginal growth of 0.6 per cent.
Mr Subramaniam said: "Corporate sector is back on recovery track from Q2 2020-21... growth in operating profits are similar to two years back."
Even improvement in steel production and consumption suggest revival of construction activity.
He said upbeat digital retail transactions with UPI payments are at new highs.
The Chief Economic Advisor also assured government is committed to providing all fiscal support.