Krishnamurthy Subramanian said caution is warranted primarily due to COVID-19.
"We should be cautiously optimistic," said Chief Economic Advisor Krishnamurthy Subramanian today, as latest official data highlighted a rebound in an economy battered by the coronavirus pandemic. Official data released earlier showed the country's GDP shrank 7.5 per cent in the July-September period, following a record 23.9 slump in the previous quarter. Though Friday's data confirmed a technical recession in India, after two consecutive quarters of negative growth, the better-than-expected contraction in the economy fuelled optimism of fast recovery from the coronavirus pandemic-caused slowdown.
The government's Chief Economic Advisor said the GDP estimates are more encouraging than what was anticipated by most commentators.
"Uncertainty in the economic outlook is due to the COVID-19 pandemic and therefore I would urge caution especially given winter months... Till the pandemic does not go away, some of the sectors that are affected by social distancing will continue to experience a demand slump," said Mr Subramanian.
GDP in the manufacturing sector rose 0.6 per cent in the September quarter, in a big sign of recovery compared with a crash of 39.3 per cent in the April-June period. Manufacturing was among the five sectors that showed improvement among eight compared with the previous quarter.
Annual growth of 3.4 per cent in farm sector also raised hopes of an early recovery, as the government gears up to distribute coranavirus vaccines to a country with about 140 crore people.
Given the uncertainty due to the coronavirus outbreak, the Chief Economic Advisor said, it is difficult to predict if the economy can make it to the positive territory in the third or fourth quarters of current financial year.
"I would say that given what we have seen in Q1 and Q2 and with the optimism that is being seen in the estimates, I do see upside potential in that estimate given the good recovery that is happening," Mr Subramanian said.
"Till large sections of the population are not vaccinated, pandemic protocols must be followed religiously. Overall, while recovery provides optimism, caution on the pandemic and therefore on the economy is still warranted," he added.