presentation on impact of covid 19 on indian economy

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How has Covid-19 affected India’s economy?

India has been hit hard by the pandemic, particularly during the second wave of the virus in the spring of 2021. the sharp drop in gdp is the largest in the country’s history, but this may still underestimate the economic damage experienced by the poorest households..

From April to June 2020, India’s GDP dropped by a massive 24.4%. According to the latest national income estimates , in the second quarter of the 2020/21 financial year (July to September 2020), the economy contracted by a further 7.4%. The recovery in the third and fourth quarters (October 2020 to March 2021) was still weak, with GDP rising 0.5% and 1.6%, respectively. This means that the overall rate of contraction in India was (in real terms) 7.3% for the whole 2020/21 financial year.

In the post-independence period, India's national income has declined only four times before 2020 – in 1958, 1966, 1973 and 1980 – with the largest drop being in 1980 (5.2%). This means that 2020/21 is the worst year in terms of economic contraction in the country’s history, and much worse than the overall contraction in the world (Figure 1).

The decline is solely responsible for reversing the trend in global inequality, which had been falling but has now started to rise again after three decades ( Deaton, 2021 ; Ferreira, 2021 ).

Figure 1: Economic contraction in India and the world during Covid-19

Source: world economic outlook, international monetary fund, april 2021. note: the gross domestic product (gdp) per capita, constant prices is measured at purchase power parity; 2017 international dollars. the gdp per capita of each series is normalised to 100 in 2011. we use population-weighted average as the aggregation method., what do the main macroeconomic indicators tell us about india’s economy during the pandemic.

While economies worldwide have been hit hard, India has suffered one of the largest contractions. During the 2020/21 financial year, the rates of decline in GDP for the world were 3.3% and 2.2% for emerging market and developing economies. Table 1 summarises macroeconomic indicators for India, along with a reference group of comparable countries and the world. The fact that India’s growth rate in 2019 was among the highest makes the drop due to Covid-19 even more noticeable.

Comparing national unemployment rates in 2020, India’s rate of 7.1% indicates that it has performed relatively poorly – both in terms of the world average and compared with a set of reference group economies with similar per capita incomes. Unemployment rates were more muted within the reference group economies and were also kept low by generous labour market policies to keep people in work.

Despite the scale of the pandemic, additional budgetary allocation to various social safety measures has been relatively low in India compared with other countries. Although the country might look comparable to the reference group in non-health sector measures, the additional health sector fiscal measures are less than half those in the reference group. More worryingly, the Indian government's announced allocation in the 2021 budget for such measures does not show an increase, once inflation is taken into account.

Table 1: Summary of key macroeconomic indicators

Source: Data on gross domestic product, constant prices (percentage change) is obtained from the World Economic Outlook Database April 2021, International Monetary Fund . Note: India’s GDP contraction is 8%, according to the International Monetary Fund (IMF) and 7.3% from recent national estimates. Unemployment rates (for youth, adults: 15+) are ILO-modelled estimates as of November 2021 and are obtained from ILOSTAT, International Labour Organization (ILO) and World Bank . Fiscal measures are obtained from Fiscal Monitor Database of Country Fiscal Measures in Response to the COVID-19 Pandemic as of April 2021, International Monetary Fund . The ‘reference group’ refers to the closest peer group statistic under which India falls. The reference group for GDP per capita is the emerging market and developing economies (EMDEs) classification by the IMF. The reference group for the unemployment rate is the low- and middle-income countries (LMICs) classification by the World Bank. The reference group for the fiscal measures is the EMDEs classification by the IMF. See Ghatak and Raghavan (forthcoming) for a comparison of India’s economic and health performance against the reference group.

How has covid-19 changed income, consumption, poverty and unemployment in india.

While the macroeconomic statistics provide a snapshot of India’s economic position, they hide the large and unequal effects on households and workers within the country.

Both wealth and income inequality has been on the rise in India ( Ghatak, 2021 ). Estimates suggest that in 2020, the top 1% of the population held 42.5% of the total wealth, while the bottom 50% had only 2.5% of the total wealth ( Oxfam, 2020 ). Post-pandemic, the number of poor in India is projected to have more than doubled and the number of people in the middle class to have fallen by a third ( Kochhar, 2021 ).

During India’s first stringent national lockdown between April and May 2020, individual income dropped by approximately 40%. The bottom decile of households lost three months’ worth of income ( Azim Premji University, 2021 ; Beyer et al, 2021 ).

Microdata from the largest private survey in India, CMIE’s ‘Consumer Pyramids Household Survey’ (CPHS), show that per capita consumption spending dropped by more than GDP, and did not return to pre-lockdown levels during periods of reduced social distancing. Average per capita consumption spending continued to be over 20% lower after the first lockdown (in August 2020 compared with August 2019), and remained 15% lower year-on-year by the end of 2020.

Official poverty data are unavailable, and the CPHS data come with a caveat of ‘top’ and ‘bottom exclusions’. For example, official statistics show a rural headcount ratio of 35% in 2017/18 ( Subramanian, 2019 ). But the CPHS data estimate it at 25%, which suggests exclusions at the lower end of the consumption distribution ( Dreze and Somanchi, 2021 ).

Despite these statistical concerns, the CPHS does provide consumption numbers for a large sample of individuals, which can provide insights into changes in consumption levels arising from the pandemic.

Table 2 reports the percentage of people who have monthly consumption expenditure below different cut-off values. The different cut-offs encompass the official poverty lines (which, in any case, have been considered too low by some commentators). The current rural poverty line is set at 1,600 rupees (£15.50) per month or over, and the urban poverty line is 2,400 rupees per month (£23.37) or over.

Based on the latest CPHS data, rural poverty increased by 9.3 percentage points and urban poverty by over 11.7 percentage year-on-year from December 2019 to December 2020. Earlier months of the CPHS show that rural poverty increased by 14.2 percentage points and urban poverty by 18.1 percentage points. Yet the actual increase in poverty due to Covid-19 is likely to be higher than what the CPHS data suggest, as indicated by other surveys .

Table 2: Percentage of individuals by monthly consumption expenditure

Source: Consumer Pyramids Household Survey (CPHS) for December 2019 and December 2020, and for August 2019 and August 2020. Notes: Estimates for consumption are calculated by dividing household adjusted total expenditure by household size and weighted using member level country weights. Adjusted total expenditure is the sum total of all consumption goods and services purchased by the household during a month, adjusted using weekly records. Real values are adjusted for inflation using the MOSPI CPI (IW) for urban workers and CPI (AL) for rural workers (Base 2012=100). Headcount ratio is the percentage of individuals who are below the poverty line in urban and rural areas in each year. Poverty line is the inflation-adjusted poverty line in rural areas (Rs 972 in 2011-12 prices) and urban areas (Rs 1410 in 2011-12 prices), which are adjusted to 2012 prices with the RBI CPI(AL) and CPI(IW) for 2011/12-2012/13 respectively. All figures are in December 2019 values and observations with missing regions are dropped. Despite a much larger sample in urban areas, the CPHS also underestimates mean per capita consumption in urban areas, which is likely to reflect their inability to survey high-income urban households. From the draft National Sample Survey Organisation (NSSO) Report on Household Consumer Expenditure for 2017-18, the CPHS estimate of mean per capita consumption in urban areas was 0.8 of the NSSO level for 2017-18. For rural areas, the CPHS estimate is 1.1 of the NSSO level.

Taking into account the general trend of reduction in poverty, an estimated 230 million people in India have fallen into poverty as a result of the first wave of the pandemic ( Azim Premji University, 2021 ).

Table 3 shows that households in the middle of the pre-Covid-19 CPHS consumption distribution saw large drops in spending after the first wave of the pandemic, helping to create a new set of people entering poverty.

The percentage of poor people in the second lowest quintile of pre-Covid-19 consumption jumped from 32% to 60% within a year. This was driven largely by rural areas, where the headcount ratio for the second quintile almost doubled.

In urban areas, the poverty line is set higher due to greater living costs and 72% of people in the second quintile of the urban income distribution were below this poverty line before the pandemic. Within a year, they were joined in urban poverty by many who had higher incomes before. Half of people in the third quintile and 29% of people in the fourth quintile fell below the poverty line after the pandemic.

This sharp rise in poverty after the first lockdown is consistent with a variety of surveys that highlighted the depth of the crisis ( Azim Premji University, 2021 ). Year-on-year urban unemployment rate jumped from 8.8% in April to June 2019 to a staggering 20.8% in April to June 2020 ( Government of India National Statistical Office, 2020 ).

Table 3: Percentage of individuals who are below the poverty line in middle quintiles of pre-Covid-19 consumption expenditure, August 2019 to August 2020

Source: Consumer Pyramids Household Survey (CPHS) for August 2019 and August 2020. Notes: Quintiles are based on 2019 mean per capita consumption levels for each region type. Consumption levels are calculated by dividing household adjusted total expenditure by household size and weighted using member level country weights. Adjusted total expenditure is the sum total of all consumption goods and services purchased by the household during a month, adjusted using weekly records. Real values are adjusted for inflation using the MOSPI CPI (IW) for urban workers and CPI (AL) for rural workers (Base 2012=100). All figures are in December 2019 values and observations with missing regions are dropped.

The pandemic has brought severe economic hardship, especially to young individuals who are over-represented in informal work. India has a large share of young people in its workforce and the pandemic has put them at heightened risk of long-term unemployment. This has negative impacts on lifelong earnings and employment prospects ( Machin and Manning, 1999 ).

A study by the Centre for Economic Performance (CEP at the London School of Economics) analyses the depth of continuing joblessness among younger workers in the low-income states of Bihar, Jharkhand and Uttar Pradesh (see Table 4, Dhingra and Kondirolli, 2021 ).

The first round of the survey randomly sampled urban workers aged 18-40 during the first lockdown quarter, finding that a majority of them who had work before the pandemic were left with no work or no pay. After the first lockdown in April to June 2020, 20% of those sampled were out of work, another 9% were employed but had zero hours of work and 81% had no work or pay at all.

Ten months on from the first lockdown quarter, 8% of the sample continued to be out of work, another 8% were working zero hours, and 40% had no work or no pay. The rate of no work or no pay was higher (at 47%) among the youngest low-income individuals (those aged 18-25 who had below median pre-Covid-19 earnings).

Table 4: Crisis labour force status of individuals who were employed pre-Covid-19: recontact sample of individuals interviewed during the first lockdown (April to June 2020) and before the second wave (January to March 2021)

Source: CEP-LSE Survey 2020 and 2021. Note: Out of work last week and zero hours last week are indicators for individuals who were unemployed in the week preceding the survey and employed but working zero hours in the week before the survey respectively. Not paid is an indicator for individuals who received no pay in April 2020 in the column of April to June 2020 and those who received no pay during January to March 2021 in all other columns. Median earnings are constructed using average earnings in January and February 2020. 18-25 refers to individuals who are between 18 to 25 years of age at the time of the first survey.

The recovery after the first wave was too muted to get many young Indian workers back into employment. For example, rural migrants continued to be reluctant to return to work in urban areas even before the second wave hit ( Imbert, 2021 ). And the second wave, which started in mid-February and appears to be flattening out in June 2021, heightened these risks of long-term unemployment by increasing the spells of economic inactivity.

What do public health indicators reveal about the impact of Covid-19 on India’s economy?

To avoid another livelihood crisis, India turned to local lockdowns during the second wave of the pandemic. Before the second wave, India’s public health performance (in terms of confirmed cases and confirmed deaths), while not the best, was ahead of several reference group countries. But the second wave has made India’s position significantly worse. The total confirmed cases per million now are comparable to those in the rest the world and the rate of vaccination is lower in India.

While death rates seem lower in India, there is massive underreporting. After accounting for the underreporting within official statistics, India’s total confirmed cases and deaths might exceed that of the rest of the world by a large margin (Gamio and Glanz, 2021).

In the conservative scenario, the total confirmed cases per million are about 13 times larger than in the rest of the world, and the total confirmed deaths per million are about 85% of that in the rest of the world. In the worst-case scenario, India is far behind the rest of the world.

There is an important caveat: while the focus of this article is on India, underreporting of Covid-19 cases and deaths is prevalent globally ( Institute for Health Metrics and Evaluation, University of Washington, 2021 ).

How has India fared so far?

More than a year has passed since India’s first national lockdown was announced. There was talk of a trade-off between lives and livelihoods when the Covid-19 crisis erupted last year. As India struggles in the second wave, it is clear that the country did poorly in both dimensions.

While India’s policy response was strong in terms of some aspects of lockdown stringency, it was ineffective in dealing with both the public health and economic aspects of the crisis. What’s more, it failed to limit the damaging impact of the crisis on the most vulnerable sections of the population.

Where can I find out more?

• State of working in India 2021 : Report from Azim Premji University’s Centre for Sustainable Employment on the effects of Covid-19 on jobs, incomes, inequality and poverty.
• City of dreams no more – The impact of Covid-19 on urban workers in India: Briefings from the Centre for Economic Performance.
• India needs a second wave of relief measures : Jean Drèze discusses the humanitarian and economic case for further support.
• Covid-19 articles from Debraj Ray .
• India COVID-19 chartbook : A series of charts on the effects of the pandemic in India from HSBC Global Research.
• India’s already-stressed rural economy is getting battered by the second wave of Covid-19 : Rohit Inani examines the crisis in India and calls for urgent relief measures.

Who are experts on this question?

• Amit Basole , Azim Premji University
• Swati Dhingra , LSE
• Maitreesh Ghatak , LSE
• Debraj Ray , New York University
• S. Subramanian , Independent Researcher
• Sanchari Roy , King's College London

Authors: Swati Dhingra and Maitreesh Ghatak

Swati thanks the erc for starting grant 760037. the authors would like to thank ramya raghavan and fjolla kondirolli for research assistance, photo by shubhangee vyas on unsplash.

• Swati Dhingra LSE View Profile
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How the recent spread of COVID-19 is impacting the Indian economy

EY India Chief Policy Advisor

A noted economist, D.K. Srivastava is an Honorary Professor at Madras School of Economics and Member of the Advisory Council to the 15th Finance Commission.

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Economy-watch-may-2021.pdf, adverse economic impact of covid-19 in india in fy22 is likely to be higher than expected earlier due to the second wave of corona. policy effort should be made to protect growth of at least 8.7%, to ensure india’s fy22 real gdp reaches the same level as in fy20..

T he month of March 2021 started with positive news for the Indian economy with the IIP showing high growth of 22.4% after a contraction of (-)0.9% and (-)3.4% in January and February 2021 respectively, reflecting a turnaround in the manufacturing sector of the economy. A challenging April 2021 ushered in with the onset of second wave of corona in India. Although CPI inflation was still contained at 4.3% in April 2021, the WPI inflation shot up to 10.5%, its highest level since 2011-12 which is the base year of this series, due to higher global crude and commodity prices partially reflecting a low base effect. This led to an increase in the inflation in fuel and power to a 49-month high of 20.9% in April 2021 from 10.3% in March 2021. 

Growth of the  Indian economy  will get adversely affected in 1QFY22 due to COVID’s second wave. Analysts have started revising their earlier FY22 growth forecasts downwards. While the IMF (23 March 2021) was the most optimistic in terms of India’s FY22 growth prospects projecting it at 12.5%, the RBI (7 April 2021) considered 10.5% to be feasible. S&P in its recent release (5 May 2021 [1] ), considered a feasible growth range of 8.2% and 9.8% under their severe and moderate impact scenarios. Moody’s (11 May 2021 [2] ) projected India’s FY22 growth at 9.3%. In the context of the ongoing uncertainty about the full impact of COVID’s second wave, a benchmark growth rate of 8.7% may be considered relevant. If at least this growth is protected, India’s FY22 GDP at 2011-12 prices would be at the same level as in FY20, that is, INR145.7 lakh crore. Policy effort should be made to protect at least this level of growth.

There is clearly a trade-off between the duration and coverage of the lockdowns on one hand, and the erosion of growth on the other. The more extensive the lockdowns, the larger would be the loss in GDP growth. Although COVID-19 has now started affecting rural areas, we anticipate that agricultural growth would remain broadly intact. Further, the maximum impact of the lockdown would be in 1QFY22 and if vaccination gathers pace June 2021 onwards, the damage to the economy in the second and subsequent quarters can be contained. The worst affected sectors are likely to be the same as in FY21 namely, construction, trade, transport, hotels et.al., followed by manufacturing and mining. The public administration, defence and other services sector had also faced a contraction of (-)4.1% in FY21. Suitable policy intervention in 1QFY22 can ensure that this sector does not contract. This would require frontloading of government’s budgeted FY22 expenditures particularly the capital expenditures.

Recalibrating budgetary aggregates amidst COVID-19 second wave challenges

We recognize that the fiscal arithmetic of Center’s FY22 budget may get disturbed with the erosion of real and consequently nominal growth rates. The real GDP in FY21 had fallen to INR134.1 lakh crore, implying a contraction of (-)8.0%. The corresponding nominal GDP was INR195.9 lakh crore. The nominal GDP growth also requires to be revised downwards in FY22. Assuming a real GDP growth of 8.7% and an implicit price deflator (IPD) based inflation of 3%, the FY22 nominal GDP growth may be close to 12%. This is premised on IPD-based inflation remaining lower than the CPI inflation of about 4.5%, as has been the trend in recent years. The budgeted FY22 nominal growth was 14.4%. The budgeted buoyancy for Center’s gross tax revenues (GTR) at 1.2 may also not hold. We consider a buoyancy of 0.9, which is the average for the five years preceding the COVID year that is FY21, to be more realistic. A combination of a nearly 12% nominal growth and a buoyancy of 0.9 would result in a growth of 10.7% in Center’s GTR. This would imply a shortfall in Center’s budgeted net tax revenues of about INR0.8 lakh crore in FY22.

Budgeted magnitudes for non-tax revenues and non-debt capital receipts at INR2.4 lakh crore and INR1.9 lakh crore respectively may also need to be revised downwards. In these cases, the budgeted growth rates were 15.4% and 304.3% respectively. The excessively high growth for the non-debt capital receipts was premised on implementing an ambitious asset monetization and disinvestment program. The COVID-disturbed year may make achieving these targets extremely difficult.

The budgeted growth in non-tax revenues is largely dependent on an assumed growth of 60% in revenues from communication services and of 44.1% in dividends and profits from non-departmental undertakings. We consider that a shortfall of INR1.5 lakh crores in non-tax revenues and non-debt capital receipts together with a shortfall of nearly INR0.8 lakh crore in Center’s net tax revenues may lead to a total shortfall of INR2.3 lakh crores in the total non-debt receipts. This, together with the lowering of the nominal GDP as compared to the budget assumptions, may imply a higher fiscal deficit at 7.9% of GDP, a slippage of 1.1% points from the budgeted fiscal deficit at 6.8% of GDP in FY22. We consider it desirable that total budgeted expenditure should not be compressed so as to support demand although expenditure should be reprioritized strongly in favour of augmenting health expenditure and health infrastructure. The Center’s capital expenditure provision for the department of health and family welfare was quite low at INR2,508.7 crores for FY22. This requires to be enhanced substantially. Building hospital capacity perhaps at every district headquarter may not only cover for the current deficiency in hospital beds but is also likely to increase construction activities and absorb a lot of currently unemployed migrant labour. This may aid India’s post COVID-19 recovery.

Inter-state spread of COVID-19 and impact on Indian economy

Chart 1 shows the shock caused by corona’s second wave because of the speed and sharpness of its upsurge. When the first COVID-19 wave subsided, the confirmed monthly cases were limited to only 0.35 million in February 2021. This number shot up to 6.94 million in April 2021, throwing out of gear, India’s health infrastructure.

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It appears that COVID-19 waves propagate in three stages: (1) seeding stage - arrival of infected international passengers, (2) explosion stage – interaction with high-density urban population, and (3) subsiding and diffusion stage. The third stage is induced by lockdowns which leads to COVID-19 subsiding in the urban areas, but also results in migrant population moving to the rest of the country.

Table 1 shows that the share in confirmed COVID-19 cases is the highest for Maharashtra (24%) followed by Kerala (8.2%), Karnataka (7.9%), Tamil Nadu (6.1%) and Delhi (6.0%). These are the states which also have the highest share in receiving international passengers. Also, these states are characterized by high density of urban population.

In the May 2021 issue of the EY Economy Watch , the In-focus section entitled “India’s experience with COVID – people’s and economy’s health”, there is a detailed discussion on the determinants of the inter-state spread of COVID-19. Two key determinants identified in this analysis are:

• State’s share in international passengers [3]
• Index of density of urban population

There are some state specific factors which also turned out to be important in the case of Andhra Pradesh, Chhattisgarh, Kerala and Uttar Pradesh. More than 90% of the variation in the interstate incidence of COVID-19 is explained by these two factors along with the state-specific effects. Important policy implications for curbing and containing future COVID-19 waves can be drawn from this analysis.

Policy needs to be devised to bring down the impact of incidence of the second wave of corona in India as quickly as possible. It would be best if this can be done by minimizing the economic costs of lockdowns, which are progressively getting extended in terms of duration and in terms of coverage of geographical area. Two key policy instruments are available with the policy makers which can be used for this purpose. One is to extend the vaccination coverage and the second is to extend the lockdown in terms of duration and coverage. The key intervention is vaccination.

Containing future COVID-19 attacks and India’s vaccination strategy

The vaccination strategy should target for universal coverage with strategic sequencing under conditions of supply shortage. A policy of vaccination that is much better targeted in the initial stages than its current ad hoc inter-state coverage may be used for achieving far more effective outcomes in controlling the spread of the second and subsequent waves of corona. In the context of the analysis of COVID-19’s inter-state incidence, given extremely high shares of COVID-19 cases in a limited number of states, a strategy of ‘saturation vaccination’ of targeted states or specified geographical area such as cities or urban agglomerations could be far more effective. Two major considerations regarding COVID-19 vaccination strategy relate to procurement of vaccines and their inter-state distribution. In this regard, we suggest the following:

• Procurement of vaccines should be fully centralized. This will keep total procurement costs to a minimum since a single agency for purchase would be able to reap economies of scale and will have much better bargaining power in the domestic and international markets.
• A Vaccination Commission may be appointed by a government order or under directions of the Supreme Court of India to oversee the interstate allocation of vaccines, its pricing and its distribution between government sector and private sector.
• There should be only two channels of distribution of vaccines namely, government and private. There should be no distinction between the central and state governments. These should be considered together as one channel and pricing should be uniform for the government channel of vaccination. State governments may be allowed to prioritize the areas/ages for vaccination in their jurisdiction. For the private sector, pricing may differ according to the specific vaccines and their attributes.

The Center in its FY22 budget, had allocated INR35,000 crore for vaccination. This amount is meant to be transferred to the states [4] . Given that vaccination is associated with strong positive externalities, the central government has a primary role in ensuring country-wide coverage. If the Center becomes the only governmental agency to procure vaccines, the average price per vaccine would be much lower than if individual states get involved in floating global tenders. For vaccinating India’s total population aged 12 years and above at 108.5 crore, total required doses would be 217.0 crore considering two doses per person. At an average price of INR300 per dose, the total vaccination cost would be INR65,108 crore. If states’ involvement pushes up the average price to say INR500 per dose, total vaccination bill to the country would unnecessarily go up to INR1.09 lakh crore. This cost enhancement, which may be higher if the average vaccine price increases even more, is clearly avertible apart from avoiding the confusion ensuing from states’ involvement in vaccine procurement and implementation.

Show article references#Hide article references

• https://www.business-standard.com/article/economy-policy/india-s-sovereign-rating-to-remain-at-current-level-for-next-2-years-s-p-121050700794_1.html
• https://www.livemint.com/economy/moodys-slashes-fy22-gdp-forecast-for-india-to-93-11620735739715.html
• Adjusted international passenger arrivals state wise. Since the international airports at DL (Delhi airport), MH (Mumbai, Pune, Nagpur airports) and KL (Calicut and Cochin airports) also serve as the major airports for international passengers from neighbouring states, we have distributed the international passenger arrivals of these three states across neighbouring states depending on their proximity and their respective share in urban population. 
• As per the Demand for Grants No.40, Department of Finance, FY22 Union Budget

Download full pdf for May 2021 issue of Economy Watch

Related articles.

A targeted policy for vaccination is likely to help India not only recover from COVID-19’s second and subsequent waves, but also help the economy recover faster. 

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The impact of COVID-19 and the policy response in India

Subscribe to global connection, maurice kugler and maurice kugler professor of public policy, schar school of policy and government - george mason university shakti sinha shakti sinha senior fellow - world resources international (wri india).

July 13, 2020

Much has been written about how COVID-19 is affecting people in rich countries but less has been reported on what is happening in poor countries. Paradoxically, the first images of COVID-19 that India associates with are not ventilators or medical professionals in ICUs but of migrant laborers trudging back to their villages hundreds of miles away, lugging their belongings. With most of the economy shut down, the fragility of India’s labor market was patent. It is estimated that in the first wave, almost 10 million people returned to their villages, half a million of them walking or bicycling. After the economic stoppage, the International Labor Organization has projected that 400 million people in India risk falling into poverty .

Agriculture is the largest employer, at 42 percent of the workforce, but produces just 18 percent of GDP. Over 86 percent of all agricultural holdings have inefficient scale (below 2 hectares). Suppressed incomes due to low agricultural productivity prompt rural-urban migration. Migration is circular, as workers return for some seasons, such as harvesting.

Evidence of Indian labor market segmentation is widely available—with a small percentage of workers being employed formally, while the lion’s share of households relies on income from self-employment or precarious jobs without recourse to rights stipulated by labor regulations. Only about 10 percent of the workforce is formal with safe working conditions and social security. Perversely, modern-sector employment is becoming “informalized,” through outsourcing or hiring without direct contracts. The share of formal employment in the modern sector fell from 52 percent in 2005 to 45 percent in 2012. During this period, formal employment went up from 33.41 million to 38.56 million (about 15 percent), while nonagricultural informal employment increased from 160.83 million to 204.03 million (about 25 percent) .

Most informal workers labor for micro, small, and medium-sized enterprises (MSMEs) that emerged as intermediate inputs and services suppliers to the modern sector. However, workers struggle to get paid, which the government identifies as great challenge. Payroll and other taxes, as well as limited access to subsidized credit for large firms, are disincentives to MSME growth. Although over half of India has smartphone access, relatively few can telework. Retail and manufacturing jobs require physical presence involving direct client interaction. Indeed, income for families unable to telework has fallen faster.

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The government’s crisis response has mitigated damage, with a fiscal stimulus of 20 trillion rupees , almost 10 percent of GDP. Also, the Reserve Bank of India enacted decisive expansionary monetary policy . Yet, banks accessed only 520 billion rupees out of the emergency guaranteed credit window of 3 trillion rupees. In fact, corporate credit in June is lower than June last year by a wide margin after bank lending’s fall. S&P has estimated the nonperforming loans would increase by 14 percent this fiscal year . Corporations have deleveraged retiring old debts and hoarding cash, as have households. Recovery through investment and consumption has stalled . These trends are exacerbated due to the pandemic. The manufacturing Purchasing Managers Index (PMI) recovered 50 percent since May but at 47.2 it remains in negative territory. Services contribute over half of GDP but its PMI, even after bouncing back , remains low at 33.7 in June. Consumption of electricity, petrol, and diesel have regained from the lockdown lows but are still 10-18 percent below June 2019 levels . Agriculture has been the bright spot, with 50 percent higher monsoon crop sowing and fertilizer consumption up 100 percent. Unemployment levels had spiked to 23.5 percent but with a mid-June recovery to 8.5 percent—and then crept up again marginally.

The National Rural Employment Guarantee Scheme (MNREGA) and supply of subsidized food grains have acted as useful buffers keeping unemployment down and ensuring social stability. Thirty-six million people sought work in May 2020 (25 million in May 2019). This went up to 40 million in June 2020 (average of 23.6 million during 2013-2019 period). The government has ramped up allocation to the highest level ever, totaling 1 trillion rupees. Similarly, in addition to a heavily subsidized supply of rice and wheat, a special scheme of free supply of 5 kilograms of wheat/rice per person for three months was started and since extended by another three months, covering 800 million people. There have also been cash transfers of 500 billion rupees to women and farmers .

However, MNREGA has an upper bound of 100 days guaranteed employment and it also does not cover urban areas. Agriculture cannot absorb more labor, with massive underlying disguised unemployment. A post-pandemic survey shows that the MSME sector expects earnings to fall up to 50 percent this year. Critically, the larger firms are perceived healthier. However, small and micro enterprises, who have minimal access to formal credit, constitute 99.2 percent of all MSMEs . These are the largest source of employment outside agriculture. Their inability to bounce back could see India face further economic and also social tensions. The economy is withstanding both supply and demand shocks, with the wholesale prices index declining sharply .

We identified labor market pressures toward increased poverty, both in the extensive margin (headcount) and intensive margin (deprivation depth). India needs to ramp up MNREGA, introduce a guaranteed urban employment scheme, and boost further cash transfers to poor households. Government efforts have been enormous in macroeconomic policy (fiscal stimulus and monetary loosening) to mitigate adversity but fiscal space is narrowing, requiring the World Bank and other international financial institutions to step up and help avert even greater hardship. Also, ongoing advances towards structural economic policy reforms have to continue.

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Impact of Covid-19 on Indian economy

The Impact of Covid-19 on Indian Economy

As per the official data released by the ministry of statistics and program implementation, the Indian economy contracted by 7.3% in the April-June quarter of this fiscal year. This is the worst decline ever observed since the ministry had started compiling GDP stats quarterly in 1996. In 2020, an estimated 10 million migrant workers returned to their native places after the imposition of the lockdown. But what was surprising was the fact that neither the state government nor the central government had any data regarding the migrant workers who lost their jobs and their lives during the lockdown.

The government extended their help to migrant workers who returned to their native places during the second wave of the corona, apart from just setting up a digital-centralized database system. The second wave of Covid-19 has brutally exposed and worsened existing vulnerabilities in the Indian economy. India’s $2.9 trillion economy remains shuttered during the lockdown period, except for some essential services and activities. As shops, eateries, factories, transport services, business establishments were shuttered, the lockdown had a devastating impact on slowing down the economy. The informal sectors of the economy have been worst hit by the global epidemic. India’s GDP contraction during April-June could well be above 8% if the informal sectors are considered. Private consumption and investments are the two biggest engines of India’s economic growth. All the major sectors of the economy were badly hit except agriculture. The Indian economy was facing headwinds much before the arrival of the second wave. Coupled with the humanitarian crisis and silent treatment of the government, the covid-19 has exposed and worsened existing inequalities in the Indian economy. The contraction of the economy would continue in the next 4 quarters and a recession is inevitable. Everyone agrees that the Indian economy is heading for its full-year contraction. The surveys conducted by the Centre For Monitoring Indian Economy shows a steep rise in unemployment rates, in the range of 7.9% to 12% during the April-June quarter of 2021. The economy is having a knock-on effect with MSMEs shutting their businesses. Millions of jobs have been lost permanently and have dampened consumption. The government should be ready to spend billions of dollars to fight the health crisis and fast-track the economic recovery from the covid-19 instigated recession. The most effective way out of this emergency is that the government should inject billions of dollars into the economy.

The GDP growth had crashed 23.9% in response to the centre’s no notice lockdown. India’s GDP shrank 7.3% in 2020-21. This was the worst performance of the Indian economy in any year since independence. As of now, India’s GDP growth rate is likely to be below 10 per cent.

The Controller General of Accounts Data for the centre’s fiscal collection indicates a gross-tax revenue (GTR) of rupees 20 lakh crore and the net tax revenue of rupees 14 lakh crore for 2020-21. The tax revenue growth will be 12 per cent, which would mean the projected gross and the net tax revenues for 2020-21 would be rupees 22.7 lakh crore and 15.8 lakh crore respectively.

This suggests some additional net tax revenues to the centre amounting to rupees 0.35 lakh crores as compared to the budget magnitudes. The main expected shortfall may still be in the non-tax revenues and the non-debt capital receipts. If we look down in the past, the growth rate for the non-tax revenues and non-debt capital receipts have been volatile, but if we add them together, they average to a little lower than 15% during the five years preceding 2020-21.

How have different sectors been affected due to Covid-19?

Hospitality Sector:

As many states have imposed localised lockdowns, the hospitality sector is facing a repeat of 2020. The hospitality sector includes many businesses like restaurants, beds and breakfast, pubs, bars, nightclubs and more. The sector that has contributed to a large portion of India’s annual GDP has been hit hard by restrictions and curfews imposed by the states.

Tourism Sector:

The hospitality sector is linked to the tourism sector. The sector that employs millions of Indians started bouncing back after the first wave, but the second wave of covid was back for the devastation! The tourism sector contributes nearly 7% to India’s annual GDP.

It comprises hotels, homestays, motels and more. The restrictions due to the second wave have crippled the tourism sector, which was already struggling to recover from the initial loss suffered by the businesses in 2020.

Aviation and Travel sector:

Aviation and other sector establishments faced a massive struggle during the second wave of the pandemic. The larger travel sector is also taking a hit as people are scared to step out of their homes. For airlines and the broader travel sector, its recovery will depend on whether people in future will opt for such services. At present, the outlook for the aviation and broader travel sector does not look good.

Automobile sector:

The automobile sector is expected to remain under pressure in the near term due to the covid-19 situation in India.

Real Estate and Construction sector:

The real estate and construction activities have started facing a disruption during the second wave as a large number of migrant workers have left the urban areas. The situation has not been grave as of 2020 for this sector.

Fiscal Deficit:

The Covid-19 pandemic has not affected our fiscal deficit and disinvestment target much. In this year’s union budget, Finance minister Nirmala Sitharaman announced a fiscal deficit target of 6.8% for 2021 to 2022. India’s fiscal deficit for 2020-21 zoomed to 9.5% of GDP as against 3.5% projected earlier. Our finance minister has promised to achieve a fiscal deficit of 4.5% of GDP by 2025-26 by increasing the steaming tax revenues through increased tax compliance as well as asset monetization over the years. According to the medium-term fiscal policy statement that the government had presented in February 2020, the fiscal deficit for 2021-22 and 2022-23 was at 3.3% and 3.1% respectively.

The impact of the lockdowns and restrictions:

The extent to which localised lockdowns and restrictions have been imposed in the past have impacted the economic recovery timeliness. There is a scope for sustained fiscal stimulus going throughout the year. To some extent, if credit is made available to businesses at low-interest rates, then monetary stimulus is also possible. The second wave has pushed back India’s fragile economic recovery. Rising inequality and strained household balance sheets have constrained the recovery. From growing only 4% in 2019-20 to contracting  7-8% in 2020-21 to staring at another low economic growth recovery in 2021, India has been virtually stopped in all its tracks. Therefore, fiscal policy must lend a generous helping hand to lead vulnerable businesses and households towards economic recovery.

What is the path to recovery?

If the outbreak worsens over time, or if the case numbers are very high, this would elevate the risk to India’s economic and fiscal recovery. The Indian economy should resume its recovery once the covid waves recede and the Indian economy will continue to grow at a faster pace than its peers at similar levels of per capita income around the world. On the downside, there will be less vigorous recoveries in the government revenues and severe downside scenarios may entail additional fiscal spending. Commodities and the automobile sector are severely affected by the initial stream of infections and associated lockdown measures. It recovered strongly in the second half of 2021.

The recovery in the global economy has made it unlikely that a sharp price decline like 2020 will happen again. The pent up demand in the automobile sector will likely drive a strong recovery when curbs are relaxed as was seen in 2020. The second wave of covid-19 has challenged an otherwise strong recovery for Indian Infrastructure. As consumers strive to maximize their utility, they will maintain earning due to regulated returns, fixed tariffs and quick recovery in demand. Airports are most at risk with international traffic recovery likely delayed by another year. This may impede a strong domestic recovery if the government increases the severity and scope of restrictions on mobility. A strong recovery is needed after a crushing 2020. As the outbreak grew worse the state governments have applied restrictive lockdown measures that halted the budding economic recovery in tracks.

Downgrades are a warning not to take economic recovery for granted. The slow pace of vaccinations is likely to be a burden on India’s economic recovery. The Indian recovery has been vigorous across many sectors particularly in the last quarter of fiscal 2021. Halts to domestic air traffic and subdued international travel have dismantled recovery for airports. The covid wave has hit small and medium-size enterprises particularly hard. It has delayed recovery in banks’ asset quality. Mobility has been down to 50-60% of the normal levels. Therefore, people are staying home more and spending less. Recovery will take hold later this year. India’s budding economic recovery throughout March solidified government revenues.

Power Sector: The Indian power sector will generate huge revenues and it would track the recovery of the GDP of India.

Airports: The second wave has threatened India’s air recovery traffic. The domestic passenger traffic has decreased by 75% of the pre-covid levels. The traffic recovery in the worst-case scenario could be 10% lower than what is predicted. Weaker traffic hits the cash flows of the airports. There will be a sharp recovery in road traffic after a short disruption. The commercial vehicle traffic will see better resilience as it supports logistics and essential services.

Ports: A modest recovery will be witnessed by import volumes. Fertilizers and containers will increase at a greater pace than crude and coal segments.

Operating cash flows will recover most infrastructure and utilities such as water, sewage, dams and natural gas segments. Credit loss will remain high in the fiscal year 2022 at 2.2% of the total loans before it recovers to 1.8% in 2023. India’s strong economic recovery and the steps taken by the central governments and the state government to mitigate the effects of the economic crisis have lessened the burden on the banks. Additionally, banks have raised capitals to strengthen their balance sheets. This will smoothen the hit from covid related losses. The weak consumption accompanied by large scale job losses and the salary cuts in the formal sector may hit the banking sector’s loans and ‘credit card’ loans. This is accompanied by lower recovery rates in the bank’s non-performing assets. That could lead to a rise in weaker loans.

If we have to move towards sustained and real economic growth against v-shaped, k-shaped or w-shaped paths, the states and the centre need to work towards a cooperative strategy through their “cooperative federalism” scheme to increase the vaccination drive.

Last year, the government chose life over livelihoods. By choosing to protect the former, the covid 1.0 was delayed in September and its intensity was much lower than predicted. By January 2021, the government had declared victory over covid-19. The first threat to economic recovery is the regional cases which are resulting in further extension of lockdowns and hence they are limiting the pace of economic recovery. The second threat is the vaccination rates arising from the vaccine supply. Without inoculating a major portion of our labour force, there is a threat that viruses will disrupt our real economy. It is apparent from the worldwide cases of Covid-19.

best article for those who are thinking of starting for new business. thanks for your information i will have a plan for contract business for constru...

many people\'s income also increased during covid , only the poor section of the country has been economically affected badly. could somebody write ...

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COVID-19 and Indian Economy: Impact on Growth, Manufacturing, Trade and MSME Sector

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Coronavirus (COVID-19) - economic impact in India

Statistics report on the economic impact of the coronavirus (COVID-19) pandemic in India

This report presents the most important information on the effects of the coronavirus (COVID-19) in India . It delves into the impact on the country's GDP and other key indicators. Information on the virus and lockdown's impact on employment, businesses, retail and consumption and lifestyles is also curated. Details about relief and financial aid is also provided. For further information about the coronavirus (COVID-19) pandemic, please visit our dedicated Fact and Figures page .

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• Basic Statistic Estimated quarterly impact from COVID-19 on India's GDP FY 2020-2022
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• Basic Statistic Estimated economic impact from COVID-19 on industry in India 2020
• Basic Statistic Estimated economic impact from COVID-19 on services in India Q2 2020-Q3 2021
• Premium Statistic Estimated economic impact from COVID-19 in India 2020 by market
• Premium Statistic Impact of COVID-19 on corporate revenues in India Q1-Q2 2020, by sector
• Premium Statistic Problems faced by business due to COVID-19 in India 2020
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Retail and consumption

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• Premium Statistic Value of government aid to combat COVID-19 in India April 2020
• Premium Statistic Impact of government aid to combat COVID-19 in India September 2020
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Getting ahead of coronavirus: Saving lives and livelihoods in India

The COVID-19 pandemic is the defining global health crisis of our time and the greatest global humanitarian challenge the world has faced since World War II. The virus has spread widely, and the number of cases is rising daily as governments work to slow its spread. India has moved quickly, implementing a proactive, nationwide, 21-day lockdown, with the goal of flattening the curve and using the time to plan and resource responses adequately.

Along with an unprecedented human toll, COVID-19 has triggered a deep economic crisis. The global economic impact could be broader than any that we have seen since the Great Depression. 1 In the full briefing materials accompanying Matt Craven, Linda Liu, Mihir Mysore, Shubham Singhal, Sven Smit, and Matt Wilson, “ COVID-19: Implications for business ,” March 2020, McKinsey’s estimates of the global economic impact of COVID-19 suggest that global GDP in 2020 could contract at 1.8 percent and 5.7 percent in scenarios A3 and A1, respectively. This means that India will face a corresponding shrinkage in global demand for its exports in addition to its domestic-production and -consumption challenges. To understand the probable economic outcomes and possible interventions, McKinsey spoke with more than 600 leaders, including senior economists, financial-market experts, and policy makers, in 100 companies across multiple sectors. Based on these inputs, we modeled estimates for three economic scenarios in India (Exhibit 1). 2 The economic scenarios for India are broadly based on McKinsey’s global scenarios in “ COVID-19: Implications for business ,” March 2020, tailored to the Indian situation. All estimates are directional rather than accurate projections or forecasts, and they will evolve over time with new data, inputs, and analysis.

In scenario 1, the economy could contract by about 10 percent in the first quarter of fiscal year 2021, with GDP growth of 1 to 2 percent in fiscal year 2021. In this scenario, the lockdown would be relaxed after April 15, 2020 (when the 21-day deadline is due to expire), with appropriate protocols put in place for the movement of goods and people after that. Our economic modeling suggests that even in this scenario of relatively quick rebound, the livelihoods of eight million workers, including many who are in the informal workforce, could be affected. In other words, eight million people could have their ability to subsist and afford basic necessities, such as food, housing, and clothing, put at severe risk. And with corporate and micro-, small-, and medium-size-enterprise (MSME) failure, nonperforming loans (NPLs) in the financial system could rise by three to four percentage points of loans. The amount of government spending required to protect and revive households, companies, and lenders could therefore be in the region of 6 lakh crore Indian rupees (around $79 billion), or 3 percent of GDP.

In scenario 2, the economy could contract sharply by around 20 percent in the first quarter of fiscal year 2021, with –2 to –3 percent growth for fiscal year 2021. Here, the lockdown would continue in roughly its current form until mid-May 2020, followed by a very gradual restarting of supply chains. This could put 32 million livelihoods at risk and swell NPLs by seven percentage points. The cost of stabilizing and protecting households, companies, and lenders could exceed 10 lakh crore Indian rupees (exceeding $130 billion), or more than 5 percent of GDP.

Scenario 3 could mean an even deeper economic contraction of around 8 to 10 percent for fiscal year 2021. This could occur if the virus flares up a few times over the rest of the year, necessitating more lockdowns, causing even greater reluctance among migrants to resume work, and ensuring a much slower rate of recovery.

Robust measures to stabilize and support households, businesses, and the financial system

Assuming scenario 2 plays out, the potential economic loss in India would vary by sector, with current-quarter output drops that are large in sectors such as aviation and lower in sectors such as IT-enabled services and pharmaceuticals (Exhibit 2). Current-quarter consumption could drop by more than 30 percent in discretionary categories, such as clothing and furnishings, and by up to 10 percent in areas such as food and utilities. Strained debt- service-coverage ratios would be anticipated in the travel, transport, and logistics; textiles; power; and hotel and entertainment sectors.

There could be solvency risk within the Indian financial system, as almost 25 percent of MSME and small- and medium-size-enterprise (SME) loans could slip into default, compared with 6 percent in the corporate sector (although the rate could be much higher in aviation, textiles, power, and construction) and 3 percent in the retail segment (mainly in personal loans for self-employed workers and small businesses). Liquidity risk would also need urgent attention as payments begin freezing in the corporate and SME supply chains. Attention will need to be given to the liquidity needs of banks and nonbanks with stretched liquidity-coverage ratios to ensure depositor confidence.

Given the magnitude of potential unemployment, business failure, and financial-system risk, a comprehensive package of fiscal and monetary interventions may need to be planned, keeping scenario 2 in mind. This might be triggered progressively as situations evolve and as actions are taken to move to the more favorable scenario 1 through effective public-health measures and graded lockdowns.

Further fiscal-, monetary-, and structural-measure possibilities

Several measures have already been announced to provide liquidity, limit the immediate NPL impact, and ease personal distress for needy households in India. These amount to around 0.8 percent of GDP. Additional measures could be considered to the tune of 10 lakh crore Indian rupees, or more than 5 percent of GDP in fiscal year 2021. All the estimated requirements may not necessarily be reflected in the fiscal deficit of the current year—for example, some support may be structured as contingent liabilities that only get reflected when they devolve. However, a package of this order of magnitude may be essential in supporting those dealing with the possible steep declines in aggregate demand and in protecting the financial system from the possible solvency and liquidity risks arising from stressed companies if scenario 2 or scenario 3 plays out.

Household demand could then be boosted beyond the support provided to needy households that the Indian government has already announced. Consideration could be given to an income-support program in which the government both pays for a share of the payroll for the 60 million informal contractual and permanent workers linked to companies and provides direct income support for the 135 million informal workers who are not on any form of company payroll. India’s foundational digital-identity infrastructure, Aadhaar, enables effective mechanisms for direct support, including through the Pradhan Mantri Jan-Dhan Yojana (PMJDY) and Pradhan Mantri Kisan Samman Nidhi (PM-KISAN) programs and to landless Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) beneficiaries. Concessions for home buyers, such as tax rebates for a time-bound period, could stimulate the housing market and unlock the job multiplier.

For bankruptcy protection and liquidity support, MSMEs could receive liquidity lines from their banks, refinanced by the Reserve Bank of India and a loan program for first-time borrowers could be administered through SIDBI. 3 Small Industries Development Bank of India. Substantial credit backstops from the government could be instituted for likely new NPLs Timely payments to MSMEs by large companies and governments could be encouraged by promoting bill discounting on existing platforms.

For large corporations, banks could be allowed to restructure the debt on their balance sheets, and procedural requirements for raising capital could be made less onerous. The Indian government could consider infusing capital through a temporary Troubled Asset Relief (TARP)-type program (such as through preferred equity) in a few distressed sectors (such as travel, logistics, auto, textiles, construction, and power), with appropriate conditions to safeguard workers and MSMEs in their value chains. Banks and nonbanks may also require similar measures to help strengthen their capital, along with measures to step up their liquidity and the liquidity in corporate-bond and government-securities markets.

To manage the macroeconomic consequences of a large stabilization package, the government would also need to consider clearly communicating to the markets and population that these measures are deep but temporary. Given that India’s fiscal resources are constrained, the Reserve Bank of India may need to finance a portion of such incremental government spending. The spending could be tracked as a COVID-19 portion of the budget to boost transparency. The inflationary effects may be low, as lockdowns severely constrict demand and the fiscal support provided would be a substitute for expenditure rather than additional stimulus. Price increases could, however, occur in some sectors, such as food, so appropriate steps would be needed to maintain harvests and keep the food supply chain operating smoothly.

Overall, devising a credible, systemwide, stabilization package would benefit from being executed in a timely fashion so it can influence the pace of recovery and help avoid severe damage to livelihoods, the economy, the financial sector, and society. Many global economies are also facing these issues and having to put in place their own stabilization packages, with similar intent.

Following the first wave of stabilization measures, attention could shift to implementing the structural reforms needed to increase investment and productivity, create jobs quickly, and improve fiscal health. This could mean introducing further reforms in infrastructure and construction and accelerating investments in health, affordable housing, and other urban infrastructure. States could accelerate spending, and institutions such as NIIF 4 National Investment and Infrastructure Fund. could deploy domestic and long-term foreign capital faster. Such reforms could also enable Make in India sectors to become globally competitive and boost exports (such as electronics, textiles, electric vehicles, and food processing), strengthen the financial sector, deepen household financial savings and capital markets, and accelerate asset monetization and privatization to raise resources.

Emergence from lockdown, safeguarding both lives and livelihoods

Countries that are experiencing COVID-19 have adopted different approaches to slow the spread of the virus. Some have tested extensively, carried out contact tracing, limited travel and large gatherings, encouraged physical distancing, and quarantined citizens. Others have implemented full lockdowns in cities with high infection rates and partial lockdowns in other regions, with strict protocols in place to prevent infections.

The pace and scale of opening up from lockdown for India may depend on the availability of the crucial testing capabilities that will be required to get a better handle on the spread of the virus, granular data and technology to track and trace infections, and the build-up of healthcare facilities to treat patients (such as hospital beds by district). In parallel, protection protocols, cocreated with industry, could be designed for different settings (such as mandis [rural markets], construction sites, factories, business-process-outsourcing [BPO] companies, urban transit, and rural–urban labor movement). As an example, industrial areas (such as Baddi, Vapi, and Tirupur) could be ring-fenced and made safe, with local dormitories set up for the labor force and minimal, controlled movement in and out of the site allowed. There could be on-site testing at factories and staggered shifts for workers. While the principles may be the same for construction sites and BPO companies, the specifics would differ.

A geographic lens could be overlaid to determine how quickly the lockdown could be lifted when new protection protocols are in place. Red, yellow, and green zones could be earmarked based on unambiguous criteria, with clear rules for economic activity, entry, and exit. The classification of areas could be updated frequently as the situation evolves. The definition of a “zone” would need to be granular (such as by ward, colony, and building cluster) to allow as much economic activity as is safely possible while targeting infection as accurately as possible. Since there is a very real possibility of the virus lingering on through the year, this microtargeting approach could help decelerate its spread while keeping livelihoods going.

The alternative approach of opening up select industry chains would be less feasible, given that sectors are tightly intertwined. A textile-export factory, for instance, would require chemicals for processing, paper and plastic for packaging, spare parts for its sewing machines, and consumables such as thread. Segregating industrial establishments by size would also be difficult, since smaller suppliers are often bound to the larger manufacturers.

Actions would need to be implemented locally, with different approaches for districts based on their characteristics (such as rural versus urban, industrial versus service oriented, strong versus weak healthcare infrastructure, and heavily infected versus not infected yet). India could consider using the last week of the current lockdown to gear up for local execution, equipping more than 700 of the most appropriate government officers with insights gained from across the world and from ongoing efforts in cities such as Mumbai and states such as Kerala, which are currently fighting the pandemic.

As part of a set of options to consider, based on prior lessons learned in India from repurposing and redeployment of needed skills and expertise for nationwide efforts, such as after floods and natural calamities, these officers could potentially be deputed to work with the district magistrates (DMs) in each district. They could cooperate in dynamically developing and helping execute locally tailored healthcare-expansion efforts, local- or state-level lockdown timetables, and back-to-work protocols. The DMs and deputized officers in districts could potentially be supported by cross-functional centers of excellence (COEs) in states or at the center. These COEs would have medical, administrative, social, economic, and business experts using their considerable knowledge to collect best practices, conduct rapid analysis, and provide valuable suggestions and recommendations to the districts to ensure high-quality implementation.

It is imperative that society preserve both lives and livelihoods. To do so, India can consider a concerted set of fiscal, monetary, and structural measures and explore ways to return from the lockdown that reflect its situation and respect that most important of tenets: the sanctity of human life.

Rajat Gupta is a senior partner and Anu Madgavkar is a partner in McKinsey’s Mumbai office.

The authors wish to thank the leaders of McKinsey India, particularly Kanmani Chockalingam, Vikram Kapur, Alok Kshirsagar, Akash Lal, Renny Thomas, and Hanish Yadav, for their contributions to this article. They also wish to thank Rakesh Mohan—a senior fellow at Yale University’s Jackson Institute for Global Affairs, external adviser to McKinsey Global Institute, and former deputy governor of the Reserve Bank of India—for his contributions to this article.

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