Impact Of Covid-19 On India’s Economy Won’t Be Very Large: Chief Economic Adviser

The impact of COVID-19 on the economy would not be 'very large' as the country has worked very well on converting the crisis created by the pandemic into an opportunity, Chief Economic Adviser K.V. Subramanian said on Tuesday.

Participating in the 'Distinguished Thought Leaders' lecture series, organised by the Great Lakes Institute of Management, (GLIM), he said that the foundation (to revive the economy) has been laid a lot.

"I am confident that the impact on the economy due to COVID will not be very large. India has really worked on converting this (COVID-19 impact on economy) crisis into an opportunity and I think there is a lot of good fundamental aspects that have been put in place to enable the impact of the pandemic was minimal," he said.

However, the CEA said the only cause of worry was that there should not be any loss of "production capacity" to smaller firms.

"I think the only worry I have is there should not be any loss of production capacity and that is why we have focused a lot on small firms (by offering measures like) emergency credit," he said.

In the past year, during the pandemic, large firms have done 'pretty well' in managing the crisis, but 'smaller firms 'were 'more impacted'.

That is the reason the government focused more on reducing the damage caused to smaller firms like issuing emergency credit, he said.

"For instance we have changed the Bankruptcy Code, ensuring that the production capacity was impacted the least on smaller firms," he said.

However, Subramanian cautioned that the situation must be reassessed once the second wave of the outbreak is over.

"We are still amid the second wave of the pandemic, and it is good to assess once the second wave is over. What I had said earlier is based on the impact caused by the first wave. We have to reassess after the second wave, but still I think that the impact will not be very large in the long run," he said.

Subramanian said India as a large economy has implemented a 'slew of reforms' and has used the crisis to actually "herald a change in economic thinking".

"Atmanirbhar's idea is focused on enabling the private sector. That is why it is different from the pre1991 experience of actually trying to build a self-sufficient India and not a self-reliant India," he said.

India's emphasis on capital expenditure-driven growth would lead to a far more "sustainable" growth, ensuring that the fiscal and monetary policies remain in sync, rather than contrasting with each other, he said.

To a query on privatisation of public sector enterprises, the CEA cited an example and said privatising Bharat Petroleum Corporation Ltd led to an increase of Rs 55,000 crore value to

the oil marketing company, benefiting the taxpayer and the government.