Indian economy witnessed a dramatic recovery in late May and most of June, said Mahesh Vyas, MD & CEO of CMIE.

However, he cautioned that one needs to temper future expectations.

“In the first quarter we were hugely dismayed by the lockdown and we had expected the worst and the worst did happen. We saw a 24 percent shrinking of the economy. But then towards the month of June, we saw a recovery starting up. There was a small recovery in May, but the recovery in late May and most of June was dramatic. That dramatic improvement which showed itself mostly in the second quarter is what has made us say that we have been through the worst and now everything will be perfectly fine,” he said in an interview with CNBC-TV18.

"We did see a major improvement in profits and profitability in the second quarter; much of it will be sustained even if it is slightly lower, it is great profits now. But this is not translating into investments. Even if you look at the September ended quarterly results of listed companies, while profits have zoomed, investments have not. So, we require to temper our optimism on the future, but we require to keep that optimism in the people who have confidence in the economy because that is what is going to get us going," Vyas added.

According to Vyas, household incomes are still way below what they were last year.

"Till incomes don’t rise, this growth is not sustainable. It is going to come to a halt and we need to ensure that the government takes active steps towards boosting the incomes of households. It is difficult to do, but that is exactly what is required in an extraordinary situation that we are in right now,” he said.

He further added that rising unemployment is a huge cause of concern.

“A lot of the people who were in the farm sectors have come out of there because the harvest season is over and much of the rabi crop sowing is also over. And because of the kharif sowing getting over, the employment offered by farming has come down. These are the pressures I am seeing. These are signals to say that the economy is not able to provide additional employment to the labour. So we need to worry about the unemployment rate rising. It is a very bad sign. It is an early warning that we require to ensure that household incomes are strengthened, demand is maintained, and employment comes back,” he said.

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(Edited by : Anshul)