Understanding Indian Economy in the Wake of Covid-19 Crisis

Abstract

The global economy faced an economic crisis in 2008 which was specifically a financial shock that took the economy into a recession, a shock which could be overcome by an economic stimulus by increasing demand and lifting the economy. But Covid-19 is different from the global financial crisis. This is a health shock which can be considered as a supply side shock deep inside the health sector. Thus the impact and the responses needed ought to be quite different. Health side is what is demanded now. And the response followed here is social distancing which means that the economy has to be held back. In the report on monetary policy released by Reserve Bank of India on 09^th April 2020, it became evident that the global economy is expected to slump in recession in 2020 as post Covid-19 projections indicate.

Nation-wide lockdown was the only way out to control this pandemic stepping into its third phase of community spread, the streets became empty, trains and flights were put to a halt with only goods train keeping the pace to supply the essential goods. Schools, offices, factories all came to a standstill position. It cannot be denied that Covid-19 has impacted the economic activity in India directly through the domestic lockdown. The Covid-19 virus which can grow exponentially was stalled in China with the help of similar lockdown. No wonder Europe and United States also followed the same model to contain the virus. Fear became the overriding emotion everywhere. What poor what rich, even the richest, most developed nations were finding hard to beat. With no vaccine yet discovered and no measures to control it, the fear that it only kills particularly the vulnerable ones and can be transmitted easily has left people worldwide in a panic mode.