COVID-19 and the Indian Economy : Impact and Response

With strong macroeconomic fundamentals, the Indian economy was well-placed on trajectory of high growth rate in early 2020 when outbreak of coronavirus epidemic in China was reported. On 11 March 2020, the World Health Organization (WHO) declared the epidemic as a pandemic, plunging the world into an unprecedented medical crisis. When countrywide lockdown was announced from 25 March 2020, most of the economic activities came to a grinding halt in urban areas. However, rural India continued to be normal in view of the exemption from restrictions allowed to farmers to conduct farming operations, including harvesting and transporting their produce to grain markets with the general conditions of face covering, hand hygiene and social distancing. These exemptions helped to maintain continuity in supply chain, especially in view of harvesting and sowing season. To deal with the economic challenges caused by the pandemic, Prime Minister Narendra Modi announced the creation of COVID-19 Economic Response Task Force under the Union Finance Minister. Similarly, PM CARES Fund was created to deal with any kind of emergency or distress situation. On 12 May 2020, the Prime Minister announced Aatmanirbhar Bharat Abhiyan (Self-reliant India Initiative) which combined relief, policy reforms and fiscal and monetary measures to help businesses and individuals to cope with the situation created by COVID-19 pandemic. A mega package of 20 lakh crore (10 percent of GDP) was announced for the purpose. India has several strengths that can help mitigate the adverse effects of COVID-induced slowdown. Agricultural sector is vibrant, inflation is under control, foreign exchange reserves (more than US$ 500 billion) are at record level, international crude oil prices are low and a robust social security net is in place. There is, therefore, a silver lining for India to bounce back and a strong case for fast-tracking the pending reforms.