Manufacturing recovery looking robust; two-fold downside risk: CEA Krishnamurthy Subramanian

For the first time in the history of independent India, the economy has entered a technical recession. The GDP growth contracted for the second successive quarter even though the 7.5 percent contraction was better than what experts were predicting.

High frequency data remains in a flux. Auto sales for the month of November threw up a mixed picture. 2-wheeler makers haven’t had a strong festive season.

The Purchasing Managers Index (PMI) for manufacturing in November dropped to its lowest level in the last 3 months. GST collections in November is just above the Rs 1 lakh crore mark. The mop-up was marginally below what was clocked in October.

So, how strong is the recovery and what are the downside risks the government is factoring in? To discuss all this data and more Shereen Bhan spoke to KV Subramanian, Chief Economic Adviser to the Indian government.

On downside risk Subramanian said, “The downside risk is two-fold, one is how the pandemic spreads in the winter month. So far it seems to be fine, it doesn’t look like the peak that we crossed in September is likely to be reached anytime soon, so that is something that is making me cautiously optimistic on the pandemic itself. Second is about the uncertainty itself. The combination of both of these how the pandemic spreads and the fact that there is still some uncertainty is what I would lay out.”

On manufacturing recovery CEA said, “In the analysis presented after the Q1 GDP print, we had mentioned that high frequency indicators do suggest a V-shape recovery especially in manufacturing. I do think that the manufacturing recovery is indeed looking robust, partly it is also reflecting the reforms that have been done.”