A MINOR PROJECT REPORT ON

FROM LOCKDOWNS TO RECOVERY: EVALUATING THE ECONOMIC

IMPACT OF COVID-19 IN INDIA

Supervised By Submitted By

PROF. (DR.) NOORAL HASAN AKANCHA RASTOGI

B.COM & 6 TH SEM
2110732010066

FACULTY OF COMMERCE
SHIA P.G. COLLEGE
UNIVERSITY OF
LUCKNOW

1
 A Dissertation Project Report
On

FROM LOCKDOWNS TO RECOVERY: EVALUATING THE ECONOMIC

IMPACT OF COVID-19 IN INDIA

SUBMITTED IN PARTIAL FULFILLMENT FOR THE AWARD OF DEGREE OF

BACHELOR OF COMMERCE
B.COM

SUBMITTED BY
AKANCHA RASTOGI
ROLL NO.: 2110732010066

UNDER THE GUIDANCE OF

PROF. (DR.) NOORAL HASAN

FACULTY OF COMMERCE
SHIA P.G. COLLEGE
LUCKNOW
SESSION: 2023-2024

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 PREFACE

In the preparation of this minor project of commerce, I have precisely

demarcated all the important points. I have made my best possible efforts
to remove all the errors.

It is a great pleasure for me to thank all those valuable suggestions that

have been given to me by Dr. Nooral Hasan Sir .I must thank the
almighty for this inspiration and guidance as well as my parents, teachers
who directed me to complete this project file.

During the course of whole project research, the researcher is expected to

use and apply his academic knowledge and gain a valuable
understanding about the Indian economy. During the course of my
research, I did a comprehensive study about various trust building factors
in Indian Economy. In this report I have put my efforts to compile the
data with utmost accuracy and give the views to the best of my judgment.

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 ACKNOWLEDGEMENT

While conducting the INDIAN ECONOMY PROJECT, innumerable people have given me
various Suggestions and opinions while conducting the INDIAN Economy. I have tried to
incorporate all those suggestions which are really relevant in preparing my final report. I think it is
essential to thank all those who have contributed and helped me throughout the duration of the
project.

Prof. (Dr.) Nooral Hassan

I am grateful to the Head of Department of SHIA P.G. COLLEGE, LUCKNOW for sharing his
valuable time for me on different occasions. I really appreciate all the teachers who provided the
requisite data for my research work. It was their Cooperation and input that made this research
possible.

I would also like to thank my friends who rendered their wholehearted cooperation in the
successful completion of the project work. Finally, I am thankful to all the people who willingly
responded to the questionnaire and their contribution has been invaluable. This project would not
have been completed without their participation. I am pleased to state that the whole report is just
the presentation of the facts that have been found during the project through different sources and
its each sentence is an exact representation of the information obtained and the analysis thereof. I
hope that I have manifested my sincere attempts to represent all the information and other things
to the best of my ability.

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 DECLARATION

I undersigned solemnly declare that the report of the Dissertation Project work
Entitled FROM “LOCKDOWNS TO RECOVERY: EVALUATING THE ECONOMIC
IMPACT OF COVID–19 IN INDIA.” is based on my own work carried out during the course of
my study under the supervision PROF. DR. NOORAL HASAN.

I assert that the statements made and conclusions drawn are an outcome of the project work. I
further declare that to the best of my knowledge and belief that the project report does not
contain any part of any work, which has been submitted for the award of any other
degree/diploma/certificate in this University or any other University.

………………………………………………………….

(Signature of the Candidate)

Name of the Candidate: Akancha Rastogi
Roll No.: 2110732010066

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 TABLE OF CONTENT

1 ABSTRACT

2 INTRODUCTION

3 IMPACT OF COVID -19 ON SOCIETY

4 IMPACT OF COVID -19 ON ENVIRONMENT

5 IMPACT OF COVID -19 ON ECONOMY

6 IMPACT OF COVID -19 ON EDUCATION

7 IMPACT OF COVID -19 ON GLOBALISATION

8 LITERATURE REVIEW

9 DATA & STYLIZED FACTS

10 MOBILITY, SOCIAL DISTANCING &CONTAINMENT

11 THE IMPACT OF EFFECTIVE SOCIAL DISTANCING

12 METHODOLOGY

13 AGGREGATE RESULTS

14 WHAT DRIVES HETEROGENITY AT THE STATE LEVEL?

15 METHODOLOGY

16 RESULTS : HETEROGENITY IN HEALTH OUTCOMES

17 RESULTS : HETEROGENITY IN ECONOMIC OUTCOMES

18 CONCLUSION & POLICY DISCUSSIONS

19 REFERENCES-

20 ANNEX FIGURES

21 ANNEX TABLES

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 Abstract

The COVID-19 pandemic has caused drastic changes across the globe, affecting all areas of life.
This paper provides a comprehensive study on the influence of COVID-19 in various fields such
as the economy, education, society, the environment, and globalization. In this study, both the
positive and negative consequences of the COVID-19 pandemic on education are studied. Modern
technologies are combined with conventional teaching to improve the communication between
instructors and learners. COVID-19 also greatly affected people with disabilities and those who
are older, with these persons experiencing more complications in their normal routine activities.
Additionally, COVID-19 provided negative impacts on world economies, greatly affecting the
business, agriculture, entertainment, tourism, and service sectors. The impact of COVID-19 on
these sectors is also investigated in this study, and this study provides some meaningful insights
and suggestions for revitalizing the tourism sector. The association between globalization and
travel restrictions is studied. In addition to economic and human health concerns, the influence of
a lockdown on environmental health is also investigated. During periods of lockdown, the amount
of pollutants in the air, soil, and water was significantly reduced. This study motivates researchers
to investigate the positive and negative consequences of the COVID-19 pandemic in various
unexplored areas.

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1. Introduction
A pandemic is an outbreak of an infectious disease throughout the whole world, spread by human
interactions. Many outbreaks of infectious diseases, such as the Hong-Kong Flu, Severe Acute
Respiratory Syndrome (SARS), Spanish Flu, and Asian Flu, have been studied in the literature.
In recent years, seven major outbreaks, namely Hantavirus syndrome, H1N1 influenza, H5N1
influenza, SARS, Middle East respiratory syndrome (MERS), Ebola, and corona virus, occurred.
Among these pandemics, the first to occur was H1N1 influenza, in 2009. H1N1 was responsible
for more than 18,000 fatalities. Similarly, more than 11,000 persons died due to the Ebola virus.
Both Ebola and SARS drastically affected socio-economic aspects in Africa and China. Similarly,
Zika virus spread in 64 different countries and affected more than 200,000 persons. In 2009,
H1N1 also disturbed various sectors such as healthcare, education, and tourism. Pandemics are not
only responsible for high mortality rates but also have negative impacts on the economy,
education, health, tourism, and the environment.
Recently, a new pandemic named corona virus disease 2019 (COVID-19) arose in Wuhan, the
capital of China’s Hubei province. COVID-19 is a very infectious disease caused by a new corona
virus named Severe Acute Respiratory Syndrome coronavirus-2 (SARS-CoV-2). SARS-CoV-2
has a higher affinity to human ACE 2 than the original SARS virus strain. SARS-CoV-2 is an
enveloped positive-sense single-stranded RNA virus..
Table 1 depicts the statistics for the mortality rates in different countries.
Table 1. Statistics of mortality rate variation from 17th June 2020 to 13th September 2021

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The vision releases RNA into the cell. Copies of the virus are created, which infect and capture
more cells, especially those within the lungs. The outbreak of COVID-19 was first identified in
Wuhan in December 2019. The World Health Organization (WHO) declared this outbreak as a
pandemic on 11 March 2021. As of 21 September 2021, about 221 countries and territories have
reported 4,716,983 deaths and 230,028,186 cases.

This paper provides a systematic analysis of the influence of COVID-19 in various sectors, such
as society, environment, education, and globalization. The main contributions of this paper are as
follows:
 Every aspect of society is analyzed from the perspective of the implication on their health;
 The effect of lockdowns due to the COVID-19 pandemic on water, air, and wildlife
is studied in detail.
 The impact of the COVID-19 pandemic on the agriculture, entertainment, and
manufacturing sectors is discussed, and strategic plans for strengthening the
agriculture sector are investigated;
 The influence of the COVID-19 pandemic on education is investigated, and both positive
and negative consequences of COVID-19 on education are studied in detail.

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2. Impact of COVID-19 on Society
The COVID-19 pandemic has affected both the economic and health conditions of all age group
people. It shows a drastic impact on the various people, who are living below the poverty line,
with disabilities, coming under older age group, belonging to indigenous communities, etc. The
entire world has seen a rapid increase in the number of positive cases due to the lack of prior
awareness of these types of corona viruses. This can create a serious risk for humans and other
living beings. Specific groups are striving for their basic amenities and medical treatment as young
people are given more preference over old people. This is responsible for generating the feelings
of inequality, discrimination, and isolation among the weaker sections. The COVID-19 pandemic
has created many trade-offs unknowingly in our society. Although, the corona virus can attack on
any age group of people, tobacco taking peoples are more vulnerable than others as this virus has a
tendency to attack on lungs and causes severe acute rupturing of respiratory system. This virus
created major shifts in the way of thinking, socializing, communication, and living.

Table 2 .Shows the distribution of age and sex based confirmed COVID-19 cases.
Table 2. Distribution of age and sex based confirmed COVID-19 death cases in the United
States on 9 August 2021.

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2.1. Older Generation
The initial reports on the COVID-19 pandemic revealed that approximately 80% fatalities occurred
in the peoples whose age over than 65 years. The International Human Rights Law guarantees
everybody to obtain the highest attainable standards of health, in contrast to which during the
shortage of services in a pandemic, the treatment of older people was perceived as of less
importance than that of young and healthy people. The elderly population with diabetes, asthma,
and cardio-vascular attacks, are more susceptible to the infection caused by corona virus. To
combat with the scarcity of essentials amid the pandemic, isolating oneself is an essential measure
that resulted in further increment in emotional imbalance in society. Due to poor health care
systems in most of the countries, older peoples are giving less importance than the younger ones.
Hence, governments should design the proper plans to strengthen their health care systems for
handling the pandemic situation.
The old peoples also suffer from depression and mental health problems. The modern
technologies are unable to mitigate the problems associated with old peoples. In future, the
webinars or workshops on digital technology should be organized for elderly population.

2.2. Young Generation

Young population is one-fourth of the total world’s population. Young people participated in
various economic and social activities enthusiastically. They are working to help the economic
weaker sections. They provided innovative ideas to solve the social and economic problems.
However, young persons were suffering from the social and economic impacts of the COVID-19
pandemic.
It is observed from a report that 267 million out of 1.8 billion young population (i.e., age from 15
to 24) were not involved in education and employment before the pandemic. After the COVID-19
pandemic, this crisis becomes more excavate than the previous situation. According to a global
survey on Youth and COVID-19, there is a 42%42% reduction in the income of employees. In
developing countries, young employees experienced more reduction in their income and working
hours. This has put enormous psychological effect on the young population. It is found that 17%
of young population suffers from depression and angst. Young population feel apprehensive and
uncertainty about the future due to disruption in business and education, social isolation, and
personal stress. Young population has less severe health impacts than the elderly population.
There is a need to implement employment policies to mitigate the unemployment crisis arises
due to the COVID-19 pandemic. The sports activities and mental health services should be
integrated in the employment policies to alleviate the mental health issues.

2.3. Disabled People

The disabled population are facing various challenges such as medical care, personal hygiene, and
implementing social distancing. These persons may be dependent on external help for doing their
daily routine and solving other issues. Disabled populations are more vulnerable to the COVID-
19 pandemic. The following challenges are confronted by disabled population during this
pandemic.

 Incapability to wear mask

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Some disabled persons are unable to wear mask due to their disability or health issues. Some
persons may feel uncomfortable to breathe and panic. Some persons wearing masks are unable
to communicate with other through the lip reading. Hence, there is no need to make it
compulsion that every disabled person should wear a mask.

 Inaccessibility of telehealth services

Visually impaired persons are unable to access cognitive delays. For deaf, the sign language
interpreters are required to access the telehealth services.

 Inaccessibility of COVID-19 testing centers

The disabled persons are unable to visit the testing centers independently. They required a safe
ambulance facility, which is impossible in this pandemic situation.

 Impact of social distancing

The social distancing plays a vital role in preventing the outbreak of corona virus. Without the
assistance of other persons, disabled persons face complications in doing their daily activities
and also suffer from mental problems.

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3. Impact of COVID-19 on Environment
Nowadays, the lifestyle of human beings has caused a drastic impact on environment. The
population has increased from 1 billion (1800) to 7.7 billion in 2020. Human beings are drastically
utilizing the natural resources for new developments of industries, infrastructure, and habitats.
Due to the increase in human population, the demands of dairy and meat products, such as eggs,
meat, and milk, have also increased. This has encouraged the poultry farming and livestock
raising, which are actually considered as the main door for persuading the transmission of various
viruses from the wildlife world to the human world. The reduction in green cover of the Earth will
severely affect our lives in the long run. Amazonian evergreen forests are known as the carbon
stores of ecosystem. According to the World Wildlife Fund, forests cover more than 30%30% of
the Earth’s surface. It is predicted that human beings will face a complete loss of rainforest cover
in the basin by 2100 due to the decrease in rainfall and the increase in temperature. Exploitation of
forest vegetation, burning of fossil fuels, releasing poisonous exhaust from industries and
transportation are responsible for disturbing the ecosystem.
It has been observed from the study of the United Nations Environment Programmed (UNEP) and
International Livestock Research Institute (ILRI) on Zoonotic that epidemics will be occurring
more repeatedly in near future due to the drastic change in climate and food chain. The unexpected
changes in environment and wild life disturbed the balance in food chain. The wild animals left
their habitats and are moving towards the cities or villages due to large scale deforestation. This
also led to the transmission of novel microbes and pathogens from these animals to human beings.
Hence, the food cycle is affected severely and is responsible for more frequently occurring
zoonotic diseases in near future. There are millions of undiscovered and undefined virus species,
which are present in animals. They may severely infect the human beings. According to
Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services (IPBES)
report, if there exists a genetic diversity, it will help in building resistance among animal
population. It also reduces the outbreak of infectious diseases. Recently, farmers are using
pesticides and fertilizers in crops to evade the insects, weeds, and various diseases. However, the
extensive usage of pesticides and fertilizers may help the pathogens to develop more resistance
towards the medicinal treatment of zoonotic diseases.

3.1. Impact on Air

The COVID-19 pandemic has affected the environment in more lethal manners. During this
pandemic, air quality is significantly improved due to reduction in human activity and
manufacturing operations. This pandemic has helped the nature in rejuvenating itself. Rivers are
clean and skies are clearer. A study on the outbreak of SARS reported that the mortality rate in
China’s most air polluted areas was twice as high as in the least polluted one. The pathogens along
with pollutants can form a strong bond, which might help them to stay intact in atmosphere for
long duration and gives them an easy way to enter into the human body. According to Annual
State of Global Air Report, 95%95% of planet’s population is breathing unhealthy air. Due to air
pollution, 1.61 million deaths are reported in India every year. In similar fashion, China faces 1.58
million deaths annually.
During the lockdown period, air quality is significantly improved due to reduction in PM2.5, SO2,
and NO2. This may led to reduction in the mortality rate. The researchers from Harvard
University’s T.H. Chan School of Public Health found the association between the number of

1
COVID-19 deaths and PM2.5 levels. They stated that the small increment of one microgram per
cubic meter of PM2.5 in air had led to 8%8% higher death rates (95%95% confidence interval)
during SARS-CoV-2. The concentration of various harmful gases was greatly reduced in various
countries after the lockdown. In the USA, 49% reduction in NO2 and 37% in CO concentration
was observed in the air quality. A drop of 70% in harmful nitrogen dioxide was analyzed in Delhi
after the lockdown. Figure 1 depicts the impact of lockdown on the concentration of NO2 in
China. It is found from Figure 1 that there is no rise in the levels of pollutants even after the new
year festival.
Figure 1. Impact on Nitrogen Dioxide level due to COVID-19 (1 January 2019–25 February
2020).

The concentration levels of air pollutants are drastically reduced during this pandemic. This may
led to a decrease in the number of patients who face asthma, lung problems, or heart attacks. These
changes are not perennial after the post-COVID-19 situation. The government should take some
preventive measures to maintain better air quality. The renewable energy systems should be
widely used in manufacturing industries. The government should encourage the peoples for
installing the solar panels. Affordable public transportation should be increased to reduce the road
traffic and
pollution. Tax reduction, subsides, and financial incentives should be n the purchase of
given electrical vehicles.

3.2. Impact on Water

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In this pandemic, the formation of acid rain is drastically reduced due to the decrease in air
pollutants. The industrial wastewater was extremely reduced due to the lockdown period. The
restriction in religious activities, fishing, and social functions may lead to less disposal of solid
waste. The self-cleaning properties of river are improved with better water quality.
The dissolved oxygen level in river is increased to approximately 5 mg/L in Yamuna River,
Delhi. In Italy, the water of Venice’s canals was cleaner than the previous year. The fishes are
seen in the Venice’s canals. The marine ecosystem is also recovered after the decline in fishing
activities and reducing the blue carbon.
There is no evidence about the survival of corona virus in drinking water supplies. However, it is
possible in untreated drinking water. Since the structure of SARS-CoV-2 is the same as that of the
previously detected corona viruses, the same precautions have to be taken, which were mentioned
for the previously discovered corona viruses. Adopting frequent hand hygiene and using water
disinfection can help in reducing the risks associated with SARS-CoV-2. Governments have to
design the proper rules and regulations for an efficient treatment of solid and water waste received
from the industries. International and national rules should be designed to handle the overfishing
problem.

3.3. Impact on Wildlife

The wildlife economy plays a crucial role in effectuating the several sustainable development goals
and supporting local communities whose economic dependency greatly relies on wildlife.
According to the World Travel & Tourism Council, wildlife tourism supports 21.8 million jobs
across the World or 6.8%6.8% of the total travel and tourism jobs. The lockdown in various
countries, closure of international borders and shutting down of transport have severely affected
this sector. Most of people left this sector. Due to less cash flow, this sector is almost closed. The
protection of wildlife and endangered species is facing a big blockage amid this pandemic. This
also led to the decrease in the funding of the anti-poaching units. The poaching activity has been
increased due to the less strict rules and regulations. In addition to this, jobless people were
dependent on wildlife for their living.
Another major concern is the illegal activity. It will speed up the transmission of SARS-CoV-2
virus from animals to humans as these animals are usually kept without proper maintenance of
hygiene. These animals might be the home for various pathogens and undiscovered viruses. It is
observed that 75% of new infectious diseases come from the consuming animals

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4. Impact of COVID-19 on Economy
The economy of any country depends on its agriculture, industries, businesses, government
investments, import, and export. The COVID-19 pandemic directly affected all the sectors. The
economists over the entire world are analyzing the impact of this pandemic on the global
economy. The global economic growth will be subjected to 1.6% decline in 2020 and 3.2% in
2021. It is predicted from the literature that China will be affected by this pandemic. The economic
growth in China may be declined by 2.4% as compared with the earlier estimation (i.e., 5.7%).
International Monetary Fund has also estimated that the global economy will fall off to 3% and
global Gross Domestic Product (GDP) will lower by 3%. Its impact can be easily seen on the
various sectors of different countries who are depending on China for trade or manufacturing. It is
also estimated that services and manufacturing sector will face tremendous losses. The tourism
and travel industry will be severely affected. International entertainment industry and sports’
brands industries will face a severe loss in their revenues and marketing. Thus, the impact of the
COVID- 19 pandemic on economy is going to be very drastic unless the reliable and proper
strategic plans are developed to handle this affray.

4.1. Agriculture
In order to discontinue the outbreak of COVID-19, lockdown was imposed on most of the
countries. This affected the food-supply chains, availability of crops, and logistic services. These
restrictions could have led to the rise of traumatic condition for the people living in developing
countries. Agriculture is the most crucial service that cannot be put in an immobilize state.
However, the collective actions have been taken by various countries for surplus food production
and cold storages. This will help those countries who are dependent on others for their food
supply. Undoubtedly, the pandemic greatly affected the economy and led to income reductions.
They might face unemployment in near future. The government of various countries are putting
their effort to balance both the lives and livelihoods. They are investing in recovery measures and
safe food delivery to the unemployed and poor people.
Figure 2 depicts the impact of COVID-19 on agriculture.

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The governments are taking valiant measures to fight against the chronic crisis in food-supply
chains. Shortage of labor may create the stumbling blocks for the farmers. The United Nation
World Food Program has estimated that about 130 million and more (i.e., from 135 to 265 million)
population will face acute food insecurity by the end of 2020. The World Bank Group is closely
associated with governments for monitoring the domestic food and agriculture supply chains. They
are also investigating the impact of unemployment and income on their food buying capabilities.
The short and long term financing strategies are required to rebuild the existing projects.
Recently, unanticipated climatic conditions and various insect attacks are becoming a new
challenge in front of farmers and governments. Both are taking appropriate measures to
implement the control operations for preventing the agriculture farmlands and crops. Figure 3
illustrates the strategic plans for strengthening the agriculture sector after the post-COVID
situation.

4.2. Business

The COVID-19 pandemic has drastically affected the micro, small, and medium enterprises
(MSME). According to All Indian Manufacturer Association, 19% to 43% of different enterprises
may disappear if the crisis persists for long duration (i.e., more than 8 weeks). Due to lockdown
and quarantine period, people have shown limited working possibilities. Consumers are
purchasing the essential and limited items that will directly affect the demand-supply chain. Goods
which are subjected to import–export market, will see a relative decline in their market due to the
seizing of trade across countries. The Economic Times reported that there is worry about the
MSME sector,

17
which accounts for third of India’s manufacturing output and 45% exports affect 63
million households.
In current scenario, wages and salaries are big issues. There are zero revenues due to shutdown of
manufacturing units. High bills, loans, and wages will be impossible for these MSMEs in near
future. MSME sector has created more than 90% of jobs in India. These jobs may be disappeared
from various sectors. The Global Alliance for Mass Entrepreneurship created a $100 million
small stabilization fund to help the small business in this crisis. The businesses are facing loss due
to the struggle in the delivery of goods, limited transportation facility, and unavailability of
migrant workers. In India, 12 million people may lose their jobs in the hospitality industry.
After COVID-19, the restarting of manufacturing units might be a difficult task. There are many
challenges, such as liquidity crunch, labor shortage, and strict rules to maintain the appropriate
COVID-19 behavior.

4.3. Entertainment
The COVID-19 pandemic has also affected the film industry. However, digital commerce and
technology have been raised in this discussion. This is one of the most prominent sectors. Online
gaming, radio, and digital media subscriptions, and the over-the-top (OTT) media service platform
are largely increased in this pandemic situation. They may provide more revenues in the upcoming
years. Whereas, film industry, theater, and live events are facing a huge loss as stated by the Event
and Entertainment Management Association (EEMA). The reason behind dwindling of these
revenues is the shutdown of theaters and multiplexes. These setbacks are not limited to the end of
the pandemic. According to the post-COVID-19 conditions, people will show variable behavior in
the acceptance of outward media. Many people may prefer the home media. Large numbers of
people are dependent on this sector for their employment. They might face the unemployment after
this pandemic situation. The new and innovative ideas are required for delivery of digital content
and events such as virtual live events. The advance cloud and remote work stations are required for
implementing the novel ideas.

4.4. Travel and Tourism

Travel and tourism play a vital role in the social and economic development of any
country. Tourism industry indirectly affects several sectors, such as labor, agricultural products
(food and beverage), transport, and accommodation. According to the Global Trade Analysis
Project (GTAP), both skilled and unskilled labor require 30% share of tourism expenditure in
developed and developing countries. Figure 4 depicts the various inputs required for the tourism
industry.
Figure 4. Contributions of different sectors towards the tourism industry.

18
However, this industry faces the hardest-hit in the pandemic situation. COVID-19 greatly affected
the travel and tourism industry. The emergency measures were applied on tourist locations that put
a large impact on the people’s mobility. According to the United Nations W rld Tourism
Organization (UNWTO), the arrivals of international tourists were decreased by 72% from January
2020 to October 2020. Due to this, the export revenues have a loss of USD 935 billion. This loss is
approximately ten times more than the loss made in 2009 under the economic crisis. Most of the
restaurants face high operating costs due to the maintenance of social distancing, sanitation, and
hygiene. Hence, restaurants were closed due to less number of tourists and high operating cost.
Some restaurants were also converted into the quarantine centers. The sustainability of travel
and tourism industry is a challenging task in this pandemic situation. Figure 5 shows the
deviation of the number of foreign tourists in the current year 2019.

The tourism industries of both developing and developed countries suffer from this crisis.
According to UNWTO, the tourist arrivals were reduced by 60–90% for developing countries.
During this pandemic situation, domestic travel has greatly raised. This will slightly affect the
economy of developing countries. The developing countries mainly depend upon the international
travel. Indian tourism is estimated to face a great revenue loss of INR 1.25 trillion the year 2020
due to the closure of hotels and aviation industry. According to CARE repor , Indian tourism
industry expects a revenue loss of INR 69,400 crore due to the suspensions of international flights.
It was mentioned that there will be 50% loss in foreign exchange earnings in 2021. Indian Airlines
has reported a loss of USD 600 million for January–March quarter. The government of India is
planning a rescue package of up to INR 100–120 billion. It has been decided to put off the taxes to
a later time on Indian aviation sector until it comes back to its feet. The companies could be
permitted to pay the taxes interest-free in next tax-cycle. In South Africa, the tourist arrivals were
reduced by 71%during this pandemic situation. The revenue was reduced from 15.8 million to 5
million in 2020. South Africa did not receive any visitors from April to September 2020. During
this crisis, Australia faced 81.4% reduction in the number of tourists. However, the United
Kingdom (UK) and Zimbabwe received a large number of overseas tourists as compared to other

1
countries. After the lift up of restrictions in the UK, the number of visitors was greatly increased
from 19,862 in April 2020 to 267,942 in August 2020.
Figure 6 shows the number of tourist arrival in different constituents in 2021.
Figure 6. Number of foreign tourist arrivals in different constituents.

This pandemic also affected the Air Cargo and increased the export cost. One possible
solution is to reduce the size of their fleets or modernize their fleets. The aviation company can
design new plans for well-planned deliveries, more fuel efficient models or by retaining order
planes, and reducing capital expenditure on new aircraft.

4.5. Service and Manufacturing Sectors

China is the major supplier of raw materials, small parts and tools to various manufacturing
industries across the globe. Due to seizing of borders across countries, world’s manufacturing units
especially those which are dependent on China for supply of raw material are facing a big
blockage in their production. Many manufacturing units either switched to a smarter model or
switched to the production of medical related products during this pandemic. The United Nations
Conference on Trade and Development (UNCTAD) has estimated a shrink of 5%5% to 15%15%
in the global foreign direct investment as the shutdown of manufacturing sector. The electronics
and electrical companies are significantly affected from this pandemic as most of their critical
parts are supplied from China. According to the International Labor Organization (ILO), it is
estimated that around 25 million people will face unemployment at a global level in pandemic. In
the service sector

2
companies, very few peoples are coming to their offices. Most of the employees are doing their
work from home.

Impact of COVID-19 on Education

The educational system is drastically affected from the COVID-19 pandemic. Nationwide
lockdown imposed the closure of schools, colleges, tuitions, examinations, and universities.
According to the UNICEF, 98.5%of the worldwide student population is affected from the closure
of education hubs in around 186 countries. In total, 60% of children’s learning loss is observed in
the least educated family. It was assumed that the closure of educational institutions may help in
preventing the spread of coronavirus. Recent studies on COVID-19 have predicted that the closure
of educational institutions has decreased the mortality rate by 2% to 4%. This scenario can be
changed if the appropriate COVID-19 behaviors are not adopted.
Another study shows that although children can catch coronavirus, they rarely show severe
symptoms and they can be act as an intermediator for coronavirus. That is why the educational
institutes were closed to stop the outbreak of COVID-19. However, the closure of educational
institutes is not the best solution. Its effectiveness can be varied with respect to the timeline of the
outbreak of COVID-19. If it was implemented in the early phase of COVID-19, then this will show
major impact on the depreciation of mortality rate. Whereas, if this step is taken in the later phase,
then this may not display major impact on the mortality rate. After the reopening of educational
institutions, a small increase in the death rate was observed.
The closure of educational institutes directly affect students, teachers, staff members,
and their families. The main impacts have been shown in various sectors over the long term
run including:

 Global Stock Market

Education put a great impact on the global stock market. Highly educated traders have
utilized the new technologies and tactics to analyze the stock market and gain more benefit.
Due to this pandemic, less experienced traders will be produced from the institutions.
 Food Insecurity
Students and their families who directly depends upon the mid-day meals. In India,
more than 100 million children are taking mid-day meals. They faced food insecurity in
this pandemic.
 Internet Services
Internet services and digital technologies such as tablets, mobiles, and laptops are required
for online learning. The high demand of these items may lead to an increase in their cost.
The students, who are living in rural areas, were facing lack of infrastructure for accessing
the Internet facilities.
 Healthcare Issues

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The families who currently do not have any way of earning bread are expected to face
many healthcare issues. The UNESCO has provided suggestions for adapting distance
learning methods and online learning programs. In India, the central government has taken
various preventive measures. The Indian government declared the complete closure of
educational institutions in the earlier phase of the COVID-19 pandemic. However, this
closure affected various competitive examinations, internships, placements, counseling
operations of students, etc. Figure 7 and Figure 8 show the positive and negative
consequences of the COVID-19 pandemic on education.

Figure 7. Positive impacts of COVID-19 on education.

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 Figure 8. Negative impacts of COVID-19 on education

5.1. Impact On Students

Due to the closure of educational institutions, students have adopted the distant learning
methods. However, still many schools are striving to execute the online learning. Some
children are unable to take the electronic gadgets and an appropriate Internet facility in
their areas. This imposed a major challenge in the use of distant learning program. For
working parents, it is very difficult to keep an eye on their ward and maintain a balance
in their home environment. To overcome the above-mentioned problems, there is a need

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to

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 develop a strong infrastructure system . It will accelerate the learning of students suffering
from the learning loss during summer or weekend breaks. It will also help to grab few extra
global opportunities of interacting and learning outside their school by connecting them to
the entire world. Figure 9 depicts the impact of COVID-19 on students.

Figure 9. Impact of COVID-19 on students.

In India, the government started the Massive Open Online Courses (MOOCs) and online
courses for both instructors and students. The online resources such as the National
Repository of Open Educational Resources, DIKSHA, and e-Pathshala were developed to
cover the syllabus of class 1st to 12th standard. The database of online courses named as
SWAYAM was developed for graduate and post graduate students. Thirty-two Direct To
Home (DTH) channels were made accessible for online classes. These were available on
all the major cable connection.

5.2. Impact on Research

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 Due to online learning, a huge traffic on the Internet has created a great strain for the
service providers. Teleconferencing or Videoconferencing was widely used to
communicate with expert’s in-place of meeting rooms. Only 2% of researchers were
working in the field of virology before this pandemic. Nowadays, a large number of
researchers and laboratories have been dedicated to COVID-19. This has led to an
approximate 10–15% increase in research in the biomedical field. On the other hand,
artificial intelligence and machine learning researchers have been conducting extensive
research studies with several published articles in various reputed journals. Moreover, a
large number of research articles on COVID-19 have been uploaded on preprint servers
such as bioRxiv, medRxiv, and arXiv. The potential lapses were found during the peer
review process, which greatly affect the prestige of major journals. The Lancet and other
prestigious journals retracted the published articles and findings. In this pandemic, a
collaborative platform was made for knowledge gathering and expertise sharing among
researchers and scholars.
Various reputed laboratories across the world have closed their doors for visitors,
employees, and non-essential staff. The scientists started their work at home. Many
researchers and scientists of reputed laboratories have collaborated over cloud computing.
They have pooled resources to access supercomputers from IBM for doing research. High
Performance Computing Consortium on COVID-19 is also being used for various critical
purposes such as:

 Forecasting the spread of the disease;

 Discovery of vaccines for COVID-19;
 Screening of chemical compounds to design new COVID-19 vaccine.

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6. Impact of COVID-19 on Globalization

The main motivation behind globalization is to improve the life expectancy and reduce newborn
mortality rate through different aspects of globalization. Different aspects of globalization can
be involved such social, economic, and political ones. The developing countries focused on the
economic aspect of globalization, which promoted wealth creation to improve the health of their
populations, while developed countries focused on social integration.

Figure 10. Main aspects of globalization.

During the COVID-19 situation, social globalization plays a significant role in handling the
containment of coronavirus. The countries with high social globalization have taken quick actions
to impose the travel restrictions and other control measures. The countries with higher political
globalization have less interested to impose the travel restrictions. They have taken a lot of time to
take the strict travel restrictions. However, there is no strong association between economic
globalization and travel restrictions. A country with more political globalization, cultural, and
interpersonal has less expectation to impose the travel restrictions in this pandemic situation. Most
of the countries whose policies to support the globalization have the least interest to implement any
restrictions on travel.
According to the Internal Labor Organization, the unemployment has increased by approximately
25 million globally. The trade of Los Angeles was reduced by 22% in the first quarter of 2020.
The developing countries such as South Asia and Africa observed 3.6% fall in their GDP. Some
food
chains declared bankruptcy. Thailand and Malaysia have been greatly affect d by the COVID-19

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pandemic. There has been a 14% downfall in job related to travel and tourism industry. It has

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also been noted that the economic impact exceeds USD 220 billion in the United States. After this
pandemic, governments are focusing on developing the domestic supply chain for some important
products. For instance, South Korea has used robots in production industries. It is also noted that
vaccines and medical equipment are being delivered from developed countries to developing
countries.

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The goal of this piece is to survey the emerging and rapidly growing literature on the economic
consequences of COVID-19 and government response, and to synthetize the insights emerging
from a very large number of studies. This survey provides an overview of the data sets used to
measure social distancing and COVID-19 cases and deaths; reviews the literature on the
determinants of compliance and effectiveness of social distancing; summarizes the literature on
the socio-economic consequences of COVID- 19 and government interventions, focusing on labor,
health, gender, discrimination and environmental aspects; and discusses policy proposals.

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II. DATA AND STYLIZED FACTS
For our empirical analysis, we construct a comprehensive state-level dataset for India at daily
frequency. For mobility, we consider Google mobility at the state level and consider two
containment measures: one developed by the IMF and another by Oxford University. For health-
related indicators, we focus on the official confirmed cases at the state level from CEIC. For daily
economic indicators at the state level, we consider electricity consumption data from Power
System Operation Corporation Limited (POSOCO), NO2 emissions data from the Air Quality
Open Data Platform, and flights data from FlightRadar24. On state level characteristics, we
examine health care infrastructure such as health care spending per capita and doctor density;
population density; demographics, such as the share of the population aged 60 and over and with
comorbidities; and economic structure, such as the share of services, GDP per capita, and
governance.The data on state-level characteristics are compiled from multiple sources, including
the Reserve Bank of India, National Statistical Office, National Institute of Public Finance and
Policy, Census of India, Density of India State of Population Census, Centre for Monitoring
Indian Economy (CMIE), and CEIC. The detailed definition of the data series and their sources
can be found in Annex Table A1. The sample period for daily data is from mid-February 2020 to
mid- January 2021, which covers the first wave of the pandemic in India. The data on state-level
characteristics is based on the latest available information. The COVID-19 pandemic has had
differentiated health and economic impacts across states and union territories. For both the
absolute number of confirmed cases and confirmed cases per capita, Maharashtra, Kerala,
Karnataka and Andhra Pradesh were among the worst hit states during the first phase of the
pandemic .

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2. Indian Economy In Pre-Covid-19 Period

The shock is playing out in almost a similar manner in all countries of the world in terms of
demand and supply disruptions and the consequent economic slowdown. In case of India
however the problem might be more acute and longer lasting owing to the state the economy was
in, in the pre-Covid-19 period. By the time the first Covid-19 case was reported in India, the
economy had deteriorated significantly after years of feeble performance.
GDP (gross domestic product) growth rate has been on a downward trajectory since 2015-16.
According to the official statistics, GDP growth slowed down to 4.2% in 2019-20, the lowest level
since 2002-03. Industry, which accounts for 30% of GDP, shrank by 0.58% in Q4, 2019-20.
Unemployment reached a 45-year high. A major driver of growth in any economy is investment
by the private corporate sector. In the pre-Covid19 period, nominal values of private sector
investment have been declining. The total outstanding investment projects between 2015-16 and
2019-20 declined by 2.4%, whereas new projects announced fell by 4%, as per data from the
CMIE (Centre for Monitoring Indian Economy). Consumption expenditure had also been falling,
for the first time in several decades.
High frequency indicators (figure 4) of urban consumption demand show that sales of passenger
vehicles as well as consumer durables growth contracted in February 2020. Overall, urban
consumption appears to have lost steam in Q4. Among the indicators of rural consumption,
motorcycle sales and the consumer nondurable segment remained in contraction in February
2020, reflecting weak rural demand. The lock-down would have dampened any chance of revival
of consumption demand and private investment.

2.1 Informal sector

India has a vast informal sector, the largest in the world, employing close to 90% of its working
population and contributing more than 45% to its overall GDP. This sector was hit by two
consecutive shocks in a short span of time, from 2016 to 2019. The first shock was
Demonetizations in November 2016 when 86% of the money in the economy became unusable
overnight owing to a government decree, followed by the haphazard introduction of the Goods
and Services tax in 2017.
While demonetization was a big enough monetary shock, it did not fundamentally disrupt
demand and supply mechanisms for too long. There was a temporary lack of means of payment.8
We now know in hindsight that people found work-arounds in the forms of electronic payments,
informal credit, converting black money into white, using old notes etc. In the case of the current
crisis, the demand is not there, the supply is not there, and hence the underlying revenues are not
there. This is therefore much more problematic. With the Covid-19 outbreak, the already
struggling informal sector has been disproportionately affected (Ray and Subramanian, 2020).
While part of the fall in commercial credit growth may have been due to lack of demand given the
balance sheet crisis in the private corporate sector, anecdotal evidence suggests that reluctance in
banks to extend credit has also been a big factor.

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As admitted by the RBI Governor himself in recent times (italics and highlight added): “In view of
subdued profitability and deleveraging by certain corporates, risk-averse banks have shifted their
focus away from large infrastructure and industrial loans towards retail loans.”
The consequences of heightened risk aversion in the banking system have begun hurting the debt
markets. In a situation where bank credit growth has been at a multi-decade ow, debt market
especially the short term debt market plays a vital role in financing firms. As shown in figures 7a
and 7b, banks’ holding of non-SLR bonds has declined sharply which means they are averse to
credit risk. Banks are instead holding more GSecs than the SLR requirements and the excess SLR
of all banks – PSBs, private, and foreign has gone up sharply which means the credit risk aversion
is across the board.

2.3 Limited Policy Space

Given the state of the economy and especially the state of the financial institutions, the policy
levers available to the government to deal with the economic crisis are limited. When the effects of
2008 Global Financial Crisis (GFC) were felt in India, the domestic economy was in a better shape
having experienced a credit boom and a high growth rate for the preceding years and the
government was also in a position to implement both monetary and fiscal stimulus measures. More
importantly, the financial institutions were not so badly damaged.

In contrast, the fiscal deficit of the government was already high in the pre-Covid-19 period and
had breached the target as specified in the FRBM Act (Fiscal Responsibility and Budget
Management Act). The fiscal deficit of the central government in 2019-20 was 4.6% of GDP
against the target of 3.5% of GDP. This has been the highest fiscal deficit since 2012-13. The
Finance Minister in her Budget Speech of February 1, 2020 had pegged the target for FY2021 to
3.5% (table 1) which will be breached by a wide margin. The FM had already used the escape
clause provided the relaxation tt clause allows the government to relax the fiscal deficit target
for up to 50 basis points or 0.5%.

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This shows that the government now has very little fiscal room. As the crisis unfolds, falling tax
collections, declining revenues of public sector enterprises and rise in health sector expenses
will
further hamper the ability of the government to support the economy. Even ithout any additional
expenditure, the deficit would go up substantially because of the decline in tax revenues and
disinvestment receipts. Net tax revenues in April 2020 fell by a staggering 70% compared to April
2019. If state-level deficits are added, then the overall fiscal deficit in 2020- 1 could very well
exceed 10% of GDP, even without taking into account the off-balance sheet items. Financing such
high levels of deficit poses a serious challenge.

Monetary policy has its limitations too which had become apparent in the run-up to this crisis. In
response to the growth slowdown, the Reserve Bank of India (RBI) embarked on a path of
monetary expansion. Between October 2018 and December 2019, it freed up around Rs. 4 trillion
of liquidity through open market operations15, and reduced the repo rate16 by 135 basis points to
5.15% – the lowest since March 2010. Yet, credit growth did not pick up, primarily due to the
heightened risk aversion in the banking sector, as discussed earlier and low credit demand from
the stressed private corporate sector.

Monetary policy has its limitations too which had become apparent in the run-up to this crisis. In
response to the growth slowdown, the Reserve Bank of India (RBI) embarked on a path of
monetary expansion. Between October 2018 and December 2019, it freed up around Rs. 4 trillion
of liquidity through open market operations15, and reduced the repo rate16 by 135 basis points to
5.15% – the lowest since March 2010. Yet, credit growth did not pick up, primarily due to the
heightened risk aversion in the banking sector, as discussed earlier and low credit demand from
the stressed private corporate sector.

In other words, the combination of demand and supply shocks are hitting the Indian economy at a
time when the tools to deal with the crisis are mostly ineffective, namely fiscal, monetary and
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financial. Over and above this, the external sector of the economy has been weakening as well. The
nominal value of exports of goods and services – another important driver of growth – witnessed a
decline by 8.49% in Q4, 2019-20.

3. Impact of the crisis

3.1 Overall macro impact
The countrywide lockdown has brought nearly all economic activities to an abrupt halt. The
disruption of demand and supply forces are likely to continue even after the lockdown is lifted. It
will take time for the economy to return to a normal state and even then social distancing measures
will continue for as long as the health shock plays out. Hence demand is unlikely to get restored in
the next several months, especially demand for non-essential goods and services. Three major
components of aggregate demand- consumption, investment, and exports are likely to stay
subdued for a prolonged period of time.
In addition to the unprecedented collapse in demand, widespread supply chain disruptions will
continue for a while due to the unavailability of raw materials, exodus of millions of migrant
workers from urban areas, slowing global trade, and shipment and travel related restrictions
imposed by nearly all affected countries. The supply chains are unlikely to normalize for some
time to come. Already several industries are struggling owing to complete disruption of supply
chains from China. The longer the crisis lasts, the more difficult it will be for firms to stay afloat.
This will negatively affect production in almost all domestic industries. This in turn will have
further spillover effects on investment, employment, income and consumption, pulling down the
aggregate growth rate of the economy.
At this stage, the possible duration of the underlying health crisis remains uncertain. In addition
there are multiple unknown factors such as the true extent of impairment suffered by the different
sectors of the economy, the magnitude of deterioration of the balance sheets of economic agents
such as firms and households, the ability of both the formal and informal sectors to bounce back to
normalcy once the lockdown is fully relaxed and most importantly, the potential destruction of the
productive capacity of the economy. Therefore, it is difficult to fully comprehend the extent of the
damage that the Indian economy is currently incurring. Some of the statistics available now
already highlight the severity and duration of the slowdown the economy may experience going
forward. After some amount of recovery in economic activity in June, 2020 it appears that the
slowdown has resumed once again in most of the sectors. The improvement seen in most high-
frequency indicators in June after the dramatic collapse in the April-May period has begun to
wane since mid June. This is presumably due to the renewed lockdowns all over the country and
damage to consumer sentiment and overall economic productivity.

3.2 Agriculture and Rural Activities

The agriculture sector is critical as large number of workers and the entire country's populations
are dependent on this sector. The performance of agriculture is also key to the state of rural
demand. In the preCovid-19 period, agricultural GDP experienced an average growth rate of 3.3%
per year in the six-year period 2014-15 to 2019-20 with intermittent fluctuations22. The
provisional estimates of the National Statistical Office (NSO) show that GDP growth in
agriculture has increased from 2.4% in FY19 to 4% in FY20. It was also relatively better at 3.5%
in Q3 of
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FY20. However, the terms of trade have moved against agriculture during 2016-17 to 2018-19 due
to bumper crop and horticultural production which caused a decline in food prices. Terms of trade
for agriculture seems to have improved in 2019-20 as the nominal agricultural GDP growth was
11.4% as compared to real growth of 4%.

3.3 Informal sector

India has a very high share of informal employment in total employment. The share, which
includes agricultural workers, has declined marginally from 94% in 2004-05 to 91% in 2017-18
(table 2). Out of a total of 465 million workers, 422 million were informal workers in 2017-18.
Even in non-farm sector (manufacturing and services), the share of informal workers was around
84% in the same year.

There are significant inequalities between informal and formal sector workers. The
informal/unorganized workers do not have access to any social security benefits and also face
uncertainty of work. Out of the total workers, the shares of self-employed, casual and regular
workers respectively were 51.3%, 23.3%, and 23.4%. Most of the self-employed and casual
employees are informal workers.

The informal workers were already facing problems with low wages and incomes in the pre-Covid-
19 period. The pandemic has affected all levels of the society but it is the informal workers
including migrants are the worst affected. With almost no economic activity particularly in urban
areas, the lockdown has led to large scale losses of jobs and incomes for these workers. There was
a loss of 122 million jobs in April, 2020. Out of that, the small traders and d ily wage labourers
lost 91 million jobs (CMIE). The employment rate was 39.1% on 22nd March, 2020 which
declined to 26.4% on 3rd May, 2020 before improving to 37.8% on 21st June, 2020. Although
there has been improvement in employment rate, it has not still reached the precovid 19 levels. A

3
survey by Azim Premiji University shows that 57% of rural workers and 80% urban workers lost
work during lockdown. Around 77% of the households consumed less food than before. Thus,
livelihoods of millions of workers were affected and it would take longer time for them to recover
from this economic shock.
Most of these migrants continue to be out of work as businesses and establishments have shut down or
because it is not easy for them to return back to the urban areas having gone through one round of extreme
hardship. In the absence of money, jobs, and any food, savings, or shelter in large cities, they had been
desperate to reach their villages but had allegedly received little support. Few migrants even died on the
way due to exertion and lack of food. These workers feel villages are better for them as they can stay with
their families. However it is questionable whether they will be able to support themselves and their families
by staying in the villages where the income earning opportunities might be significantly worse than in the
cities, the very reason why they had migrated out of their native places in the first place.

Some of the migrants have returned to urban areas after relaxation of the lockdown but many of
them are still in rural areas. These workers are looking for jobs in rural areas. Even the skilled
and semi-skilled are working in the works of MGNREGA. It will take some time for the
economy to pick up in the post-Covid-19 period and this will further aggravate the future
uncertainty for informal workers in general and migrant workers in particular.
In the formal sector to the extent that firms do not close down, employees will still have their jobs and
receive their salaries. The informal sector works differently. It depends crucially on people’s daily
demand. With a large chunk of the potential customers of the informal sector staying at home right now
and withdrawing from non-essential expenditures, the survival of informal sector units will become
questionable with every passing day, especially as the health crisis and the associated lockdown drags on.
Many firms in the informal sector will be forced to shut down.

4. What kind of policy support is needed?

The immediate objective of the policy responses to the economic impact of Covid-19 is to
ameliorate the effect of the shock on economic agents in both the formal and the informal sectors
and to help them tide over the crisis. Against the background of a weak economy, the twin shocks
of Covid-19 and lockdown are operating at two levels:

 Creating supply-side disruptions

 Triggering reduction in aggregate demand

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Economic outcomes among states were also significantly heterogeneous, as evidenced by the
peak- to-trough change in NO2 emissions and energy consumption.5 For example, NO2 emissions
declined the most in West Bengal and Gujarat, while falls in energy consumption were largest in
states such as Sikkim, Himachal Pradesh, and Punjab.

3
In addition, the decline in mobility varied across states, reflecting the timing and severity of the
pandemic in states and efforts to combat it. While the general trend is simila , particularly in the
early phase that coincided with the national lockdown that started on March 25th, 2020,
movements of Google mobility across states and across time in the later period differ
considerably, where containment efforts were more decentralized, relying on local containment
zones. For example, in mid-April 2020, the government announced several relaxation measures in
geographical areas designated as non-hotspot (orange and green zones). At the end of July 2020,
the central government issued guidelines to further paving the way for a phased re-opening of
activities across the country and limiting the lockdown only to containment zones. As seen in
Figure 3, the decline in mobility in Maharashtra, among the worst-hit states, is much more marked
than in Rajasthan.

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Sources: Google Mobility and IMF Staff Calculations.
III. MOBILITY, SOCIAL DISTANCING, AND CONTAINMENT

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We construct a measure of state-level social distancing and containment by using both a national-
level stringency index and data on state-level mobility. This approach allows us to assess the
interaction between the national-level stringency index and state-level mobility to capture the
impact of “official” containment measures and “voluntary” social distancing (IMF 2020c). On
national-level stringency, we use a new IMF containment index (see Furceri, Kothari and Zhang,
2021), which covers six economic sectors (international travel, schools, retail, industry, services,
and public gatherings). Compared with other indices (such as Hale and others 2021), the new
index has two advantages: it distinguishes between key economic sectors (services, industry, retail)
— thus providing a granular view of containment measures—and it captures announcements about
future changes to containment measures. We focus on two components of Google mobility indices
(retail and recreation mobility and transit stations mobility) that have the highest absolute
correlation with the Oxford Stringency Index in India. Retail and recreation can be interpreted as a
proxy for discretionary spending and can be used to study how COVID-19 has impacted consumer
behavior. Transit station mobility, on the other hand, can be regarded as a proxy for changes in
workplace behavior. The state-level effective social distancing indices highlight differences across
states. While the initial spike in social distancing was largely driven by stringent national
lockdowns, we observe state-level divergence in social distancing and containment as states
reopened. Figure 5 presents the evolution of the effective distancing index and the daily growth
rate of COVID-19 cases for two states: Maharashtra and Rajasthan. A common feature across the
two states is that a high degree of effective social distancing coincides with a sharp reduction in
the growth rate of confirmed cases.

39
Similarly, we observe a common negative relationship between the degree of social distancing and
containment and energy consumption at the state-level, even though states tend to have different
energy consumption patterns (Figure 6).

IV. THE IMPACT OF EFFECTIVE SOCIAL DISTANCING

We follow the methodology of Deb et al. (2020a, b) and IMF (2020a), applied at the regional level
in India, to study the impact of effective state-level social distancing on health and economic
outcomes. Establishing causality is difficult in this context because the decision to implement
containment measures crucially depends on the evolution of the virus, which, in turn, may affect
mobility and economic activity (Maloney and Task in 2020). We address this by controlling for
the lagged values of COVID-19 infections and economic variables in our specification. Given we
have data at the daily frequency; this allows us to effectively control for the endogenous response
of containment measures and social distancing to the spread of COVID-19. To further account for
the expected evolution of the pandemic in each state and other unobservable variables, we include

4
state-specific time trends and fixed effects. The fixed effects also capture all time-invariant state-
level differences. Our basic framework is based on Jordan’s (2005) local projections methods,
where we look at the impulse response of containment measures on health outcomes captured by
the number of COVID-19 cases and various economic variables. In essence, we use a “difference-
indifference” approach that allows us to compare the dynamic evolution of infected cases and
economic variables before and after the day of the introduction of social distancing (treatment) in a
given state (treatment group) with that of another state (control group) that has not instructed the
social distancing on the same day. The regression we estimate is:

∆IIii,+ℎ = uuii + qℎccii,tt + XX′ii,ttΓℎ + ∑ ƒƒℎ,ℓ∆IIii,tt−ℓ ℒ ℓ=1 + ssii,tt+ℎ (1)

∆IIii,tt+ℎ = IIii,tt+ℎ − IIii,tt+ℎ−1 and IIii,tt

is the log of the number of infections or economic indicator in state ii at date tt, ccii,tt denotes the
measure of effective state-level social distancing described in Section III; XX is a vector of control
variables, including lags and state-specific time trends; and uuii captures state-level fixed effects,
including potential state-level differences in data quality.
Equation (1) is estimated for each day h=0,..,30. Impulse response functions are computed using
the estimated coefficients θθℎ, and the 95 and 75 percent confidence bands associated with the
estimated impulse-response functions are obtained using the estimated standard errors of the
coefficients θθℎ, based on robust standard errors clustered at the state level. Our sample consists
of a balanced sample of 34 states. The estimation period is February 15, 2020 to January 12,
2021, which covers the first wave of the COVID-19 pandemic in India.

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 B. Aggregate Results

Figure 7 shows the estimated dynamic cumulative response of the number of confirmed COVID-
19 cases and the growth in energy consumption to a unitary change in the effective social
distancing and containment index over the 30-day period, together with the 95 and 75 percent
confidence intervals around the point estimates. We find that while social distancing and
containment has been very effective in reducing the number of COVID-19 cases, with B cases
declining by around 80 percent9 relative to a baseline of no social distancing and containment, it
has come at a large economic cost, with energy consumption growth on average declining by
around 12 percentage points after about 10 days, but recovering somewhat thereafter.

Note: Impulse response functions are estimated using a sample of 34 states using daily data from
February 15, 2020 to January 12, 2021. The graph shows the response and confidence bands at
95 and 75 percent. The horizontal axis shows the response x days after effective social
distancing.
Estimates based on

∆IIii,tt+ℎ = uuii + qℎccii,tt + XX′ii,ttΓℎ + ∑ ƒƒℎ,ℓ∆IIii,tt−ℓ ℒ ℓ=1 + ssii,tt+ℎ where

∆IIii,tt+ℎ = IIii,tt+ℎ − IIii,tt+ℎ−1 and IIii,tt

is the log of the number of infections or economic indicator in state ii at date tt. The model is
estimated at each horizon ℎ = 0, 1, … HH, with a lag structure ℓ = 1, 2 … ℒ; ccii,tt is the measure
of effective state level containment and social distancing; XX is a matrix of time varying control
variables and state specific time trend; and uuii captures state level fixed effects.
Results are similar to alternative high frequency proxies for economic activity. Figure 8 shows the
results for two such measures: the level of NO2 emissions and the number of flights. NO2
emissions are strongly associated with the level of economic activity, particularly manufacturing.
Using cross-country data during the COVID-19 pandemic, Deb et al. (2020b) confirms a
statistically significant relationship between NO2 emissions and industrial production indices
using a monthly database of industrial production indices for 38 countries and monthly levels of
4
NO2

4
emissions. The results suggest that our measure of effective social distancing significantly reduced
the amount of NO2 emissions. In states where stringent social distancing and containment were
implemented, these may have reduced the amount of NO2 emissions cumulatively by almost 86
percent after 30 days, relative to a baseline of no social distancing and containment. Looking at a
more sector specific indicator in the form of number of flights, the results show a decline of over
75 percent at its peak.

Our results are found to be robust to alternate specifications. While our baseline measure of
effective social distancing combines the de-jure measure of containment measures at the
national and state level with de-facto social distancing measured by Google mobility (which
incorporates the de-jure element with voluntary social distancing), our results remain largely
unchanged if we only focus on the de-facto measure (Google mobility). In addition, our results
continue to hold if we combine information contained in the index of official containment
measures with mobility trends using principal component analysis (Figure A1). Furthermore, the
results are robust to alternate econometric specifications, such as different lag structures, longer
projection horizons and alternative standard errors (e.g., Driscoll-Kay). The results are also
robust to different sub- samples and additional controls, including nonlinear trends and daily
time fixed effects.

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 V. WHAT DRIVES HETEROGENITY AT THE STATE
LEVEL? A. Methodology

Multiple factors could drive the effectiveness of social distancing and containment measures on
health and economic outcomes, many of which are interrelated. In this paper, we consider six
broad categories of factors: (I) health infrastructure, (ii) vulnerability of the population to
COVID- 19, (iii) ease of social distancing, (IV) economic structure, (v) income level, and (VI)
government effectiveness. Within each category, we identify different proxies which a priori
capture different dimensions. These factors vary widely across states but are also interrelated. For
example, richer states (captured by higher state level GDP per capita) tend to have better health
infrastructure and are more urbanized. Annex Table A2 shows the correlation matrix for the
factors that capture state characteristics. We employ an augmented specification of equation (1) to
address the issue of whether the estimated effects vary across states depending on state-specific
characteristics. To allow the impulse responses to vary with state-level characteristics, we
augment our local projections using the smooth transition autoregressive model developed by
Granger and Terävistra (1993).
∆IIii,tt+ℎ = uuii + θθℎ LLFF(zzii,tt)ccii,tt + θθℎ HH(1 − FF(zzii,tt))ccii,tt + XX′ii,ttΓℎ + ∑
FF(zzii,tt) ƒƒℎ,ℓ∆IIii,tt−ℓ ℒ ℓ=1 + ∑ (1 − FF(zzii,tt))ƒƒℎ,ℓ∆IIii,tt−ℓ ℒ ℓ=1 + ssii,tt+ℎ (2)
With FF(zziiii) = eeeeee−γγzziiii/(1 − eeeeee−γγzziiii), γγ > 0
Where z is a state-specific characteristic normalized to have zero mean and a unit variance.
The weights assigned to each regime vary between 0 and 1 according to the weighting function (. ),
so that FF(zziiii) can be interpreted as the probability of being in a given regime. The coefficients
θθℎ LL and θθℎ HH capture the impact of social distancing at each horizon h in cases of very low
levels of z (FF(zziiii) ≈ 1 when z goes to minus infinity) and very high levels of z (1 − FF(zziiii)
≈ 1 when z goes to plus infinity), respectively. (zziiii)=0.5 is the cutoff between low and high
country-specific policy responses—for example, low or high health infrastructure.
The advantage of this approach is two-fold. First, compared with a model in which each
dependent variable would be interacted with a measure of country-specific characteristics, it
permits a direct test of whether the effect of containment measures varies across different state-
specific “regimes”. Second, compared with estimating structural vector autoregressions for each
regime, it allows the effect of containment measures to vary smoothly across regimes by
considering a continuum of states to compute impulse responses, thus making the functions
more stable and precise.

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B. Results: Heterogenity in Health Outcomes
The empirical results confirm our hypotheses that social distancing and containment measures
tend to be more effective in reducing the number of COVID-19 cases in stat s with stronger health
infrastructure; higher shares of vulnerable populations (co-morbidities and population aged 60 and
over) and literacy rates; lower population density; and better governance (Figure 9). Below we
discuss these results in more detail.

Figure 9: Summary Results: The Role of State Characteristics on Health Outcomes

The first set of factors focuses on health infrastructure. The hypothesis is that better health
infrastructure can make social distancing more effective by allowing for greater testing, contact
tracing, and containment. We proxy the health infrastructure of a state by looking at the heath care
spending per capita and doctor density. The states vary widely, and, while the two proxies are
correlated, they provide distinctly different rankings. For example, Delhi, Himachal Pradesh, and
Uttarakhand have among the highest health care expenditures per capita, while Andhra Pradesh,
Tamil Nadu, and Karnataka have relatively high doctor density measured by the number of doctors
per 1,000 people (Figure 10). The impulse responses in Annex Figure A2 suggest that the states’
health infrastructure plays an important role, with social distancing measures resulting in a much
larger and statistically significant reduction in the number of COVID-19 infections in states with
higher per-capita health expenditure and higher doctor density11. For example, the number of
confirmed cases would decline by close to 90 percent for states with high health expenditure and
doctor density, relative to a baseline of no social distancing and containment (Figure 9).

4
Next, we focus on the share of vulnerable population by state. The vulnerable population is proxies
by the share of the population with co morbidities (with diseases such as diabetes mellitus, chronic
respiratory diseases, cardiovascular diseases, or cancer), the share of over60 population, and life
expectancy. States such as Kerala and Tamil Nadu have a relatively high share of population with
co morbidities and over-60s (Figure 10). The impulse responses show that states with a larger
share of population with co morbidities tend to benefit more from social distancing (Annex Figure
A3). It is likely that states with higher co morbidities witness a greater impact from social
distancing and containment measures because of better adherence to the measures and reduced
movements of those who may be asymptomatic. Similar results are obtained when we focus on
alternative measures of vulnerable population such as the share of people above the age of 60 or
life expectancy (Annex Figure A4).

The third set of variables of interest is related to the ease of social distancing. In general, social
distancing is likely to be more effective in less densely populated areas and in areas with lower
urbanization. Adherence to social distancing and containment measures are likely to be better in
areas with higher literacy, both as a result of better understanding of the measures and the need
and reasons behind it, as well as greater ability to social distance, for example, through remote
working. As can be seen in Figure 11, state-level heterogeneity is sizeable in population density
and literacy rate. Impulse responses, shown in Annex Figure A5, confirm both hypotheses. We
find that low population density is associated with a significant reduction in case counts, while the

4
results for high population density states are less robust, as containment is likely to be more
effective when population density is low. Similarly, while the impact of containment and social
distancing measures are not significant in states with low literacy, states with higher literacy
see greater-than-average benefits from social distancing, with a larger reduction in the number
of COVID-19 infections.

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C. Results: Heterogeneity in Economic Outcomes

On the economic front, we find that social distancing and containment measures have the most
adverse impact in states with higher shares of services (particularly contact-intensive services) and
urbanization. In addition, the impact tends to be more persistent in states with 18 lower income,
weaker health care infrastructure (lower doctor density), and lower government effectiveness
(Figure 12).

Figure 12: Summary Results: The Role of State Characteristics on Health Outcome

It is not surprising that the impact of social distancing and containment measures on economic
activities depends on the economic structure at the state level. Social distancing is likely to
impact services more, particularly contact-intensive services. As can be seen in Figure 13, the
share of services varies considerably by state, with Delhi and Chandigarh the states with the
highest share of services in state GDP. Furthermore, urban centers are likely to be more affected
because of a greater disruption to economic activities from COVID-19 and more intensive
enforcement of containment and social distancing.

Figure 13: State-level Heterogeneity: Economic Structure and Income

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The empirical results confirm that states with a higher share of services and contact-intensive
services witness a larger decline in energy consumption growth (Figure A6). A similar result
holds for the share of urban population, where we see a sharp decline in energy consumption
immediately following social distancing, with a gradual recovery over time as people adapt to
more flexible ways of work, such as remote working in urban areas (Figure A7).
On income levels and health infrastructure, we hypothesize that richer states may be affected
economically initially, but the impact may be less persistent (Figure 13). Part of the reason is that
richer states can provide greater support and adapt faster, for example, with more people
employed in factories or high-skill service jobs that can adjust more readily to new operating
environment and potentially timework. Our empirical results confirm that richer states are better
able to adapt to social distancing, even if they are more affected initially. Annex Figure A8 shows
that richer states are more affected by social distancing after about a week to a fortnight compared
with poor states, but they also tend to bounce back after about 20 days, while poorer states see a
more persistent decline.
On better health infrastructure, we show earlier that containment and social distancing is more
effective, leading to a greater decline in COVID-19 cases (Annex Figure A2). A similar result is
borne economically, where we find that the economic costs in states with higher doctor density
are smaller and more transitory, with faster pandemic control resulting in positive benefits after
about 20 days (Annex Figure A9). In other words, better health infrastructure can help a state
bounce
back from the pandemic faster, containing the overall economic fallout. In c ntrast, states with
poorer health infrastructure witness a more prolonged outbreak and a larger and more persistent
economic impact.
Finally, on government effectiveness, we found that low government effecti eness is associated
with a more profound and persistent impact on economic activities, while the impact is lower
and more transient in states with high government effectiveness. Part of the reason is that better
governance is associated with better enforcement of containment and social distancing together
with better infrastructure and delivery of services, therefore limiting the overall economic losses.

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VI. CONCLUSIONS AND POLICY DISCUSSIONS

The health and economic impacts of COVID-19 on India have been substantial, with states
varying considerably in both health and economic outcomes. In this paper, we quantify the impact
of containment measures and social distancing on both the health and economic 20 fronts at the
state level in India. In doing so, we develop a de-facto state-level social distancing measure by
combining an ordinal index of containment stringency and observed mobility trends at the state
level. We also examine the role of state-level factors, such as health infrastructure, population, and
economic characteristics, including the share of services in the economy and governance.
The empirical analysis suggests that social distancing and containment measures were very
effective in reducing the number of COVID-19 cases but came at a high economic cost. Social
distancing was most effective in reducing cases in states with strong health infrastructure; high
shares of vulnerable populations (co-morbidities and population over 60) and literacy rates; and
low population density. The most adverse economic impact was observed in states where the
shares of services (particularly contact-intensive services) and urbanization were high. In addition,
economic impact was more persistent in states with lower GDP per capita and weaker health care
infrastructure. It also turns out that governance plays an important role in both the health and
economic outcomes, with social distancing having the most health benefits and the least economic
costs in states with better governance.
The results highlight that adequate spending and better health care infrastructure are crucial in
containing health crises. Better health care infrastructure leads to more effective containment
and social distancing, limiting health and economic costs. Strong governance is important in the
effective implementation of social distancing and containment measures and in limiting its
economic fallout. Given the large economic impact on services and urban centers, the results
highlight the importance of ensuring that the social safety net adequately supports the most
vulnerable populations, including the urban poor and in service-intensive sectors.

5
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 ANNEX FIGURES

Figure A1: Robustness to alternative measures of social distancing

Social distancing measured by state level changes in mobility only

Social distancing measured by Principal Component Analysis (PCA) of official

containment measures and mobility

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Social distancing measured by the Oxford stringency measure and mobility

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 Figure A2: Interaction with Health Infrastructure

Health Expenditure per Capita

Doctor Density, number of doctors per 1000 people

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 ANNEX TABLES
Table A1: Data Definitions and Sources

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Table A2: Cross-Correlations - State-Level Characteristics

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5