Page 43 - ES 2020-21_Volume-1-2 [28-01-21]

26 Economic Survey 2020-21 Volume 1

Box 6: From correlation to causality

The significant correlation of the difference between expected and actual cases and deaths, and the
economic variables with the state level stringency index implies that the stringency of the lockdown
had a causal impact on these outcomes.
First, any unobserved factor that is peculiar to India - such as higher immunity levels, universal BCG
vaccination, or any other socio-economic factor cannot be accounting for the correlations between
the deaths and economic variables at the state level with the stringency of the lockdown measured at
the state level. This is because these correlations exploit differences across States in the deaths and
economic variables, on the one hand, and the differences in the stringency of the lockdown across
States. By construction, these differences across states remove the influence of any peculiarity that
is specific to India. Therefore, these correlations cannot be due to the influence of some observed or
unobserved characteristic that is peculiar to India.
Before interpreting a correlation as a causal relationship, a second concern that econometricians worry
about stems from the possible reverse causality, i.e., that the future deaths or economic variables cause
the initial lockdown. Of course, this is not possible. A more nuanced concern in this context is that
the stringency of the lockdowns at the state level were precisely because of the anticipated difference
between actual and estimated cases or deaths. Given the enormous uncertainty that policy makers
faced when making the lockdown decisions, such precise expectations during the lockdown is indeed
extremely far-fetched. Therefore, the evidence that has been documented indeed shows convincingly
that the stringent lockdown saved lives and supported a V-shaped recovery across all the economic
indicators.

INDIA: RIDING AGAINST THE WAVE

1.37 India, in fact, has been an outlier in its experience with COVID-19. It reached its first peak
in mid-September, after which rising mobility has been accompanied with lower daily new cases
(Figure 21). Globally, many European countries and US have been facing deadly second and
third waves around this time with easing of lockdowns and increasing mobility. Most countries
had to re-impose intermittent lockdowns while India has been increasingly unlocking. These
trends reinforce that India has been effective in combating the COVID-19 pandemic.

Figure 21a: Rising Mobility and Falling Cases in India

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Source: Data accessed from https://www.Covid19india.org/ and MOHFW - Data as on 31 December, 2020