India took short-term pain for long-term gain amid COVID-19: Economic Survey

New Delhi: Chief Economic Advisor KV Subramanian on Friday address a press conference and said the early intense lockdown in the country saved lives, helped faster recovery of economy. He also added that India’s policy response to COVID-19 was guided by the realisation that the GDP growth will come back, but not lost human lives.

“During high uncertainty, policy should minimise large losses. India’s policy response to COVID-19 was guided by the realisation that the GDP growth will come back, but not lost human lives. Early intense lockdown saved lives, helped faster recovery,” Subramanian said.

The CEA added that the chapter 1 of the Economic Survey is about India’s policy response to COVID-19, Saving Lives And Livelihoods, amidst a once-in-a-lifetime crisis. He also added that the Economic Survey 2021 team has done an analysis of what could have been vs. what happened. Both on COVID-19 cases and deaths, India has done really well.

“Strong correlation of lockdown with decline in cases and deaths is found across states, not just within a few states. Hence Economic Survey infers that lockdown had a causal effect on saving lives and livelihoods, Subramanian said.

He also launched the Economic Survey – Stringency of COVID-19 and said lockdown correlates with negative economic growth in same period but with positive growth in future time period.

“Economic Survey 2021 calls for countercyclical fiscal policy to boost growth during economic crisis, as fiscal multipliers are disproportionately higher in economic crises than economic booms,” Subramanian added.

He said that India avoided about 37 lakh cases and about 1 lakh deaths through its strategies. Even without the lockdown, the pandemic would have created significant economic impact.

“India’s policy response was guided by research in epidemiology and economics. Nobel-prize winning research Hansen and Sargent which says when faced with enormous uncertainty, policies must aim to minimize large losses. GDP growth will come back, human lives won’t. India recognised, intensity of lockdown matters most in the beginning of the lockdown,” he added.

He added that the policy response which India came up with, was a mature and farsighted one. “India undertook short term pain to get long term gain. The ‘V-shaped recovery’ makes India a sui generis case in mature policy making,” he added.

He addressed the press conference after the Economic Survey was presented by Union Finance Minister Nirmala Sitharaman earlier ion the day.

The Economic Survey 2020-21, authored by a team led by Subramanian, details the state of different sectors of the economy as well as reforms that should be undertaken to accelerate growth. The economy, which was battered by the coronavirus lockdown, is expected to see a strong recovery in the 2021-22 fiscal year.

The gross domestic product (GDP) contracted by a record 23.9 per cent in April-June and by 7.5 per cent in the second quarter.

For the full fiscal, the survey projected a contraction of 7.7 per cent and V-shaped recovery in the next. GDP growth is seen expanding by 11 per cent in the 2021-22 fiscal (April 2021 to March 2022).