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2 Economic Survey 2020-21 Volume 1

uncertainty, india adopted a strategy of Bayesian updating to continually calibrate its
response while gradually unlocking and easing economic activity.
Using a plethora of evidence, the Survey demonstrates the benefits of this strategy in this
chapter. india has transformed the short-term trade-off between lives and livelihoods into a
win-win in the medium to long-term that saves both lives and livelihoods. By estimating the
natural number of cases and deaths expected across countries based on their population,
population density, demographics, tests conducted, and the health infrastructure, we
compare these estimates with actual numbers to show that india restricted the Covid-19
spread by 37 lakh cases and saved more than 1 lakh lives. Uttar Pradesh, Gujarat and Bihar
have restricted the case spread the best; Kerala, Telangana and Andhra Pradesh have saved
the most lives; Maharashtra has under-performed the most in restricting the spread of cases
and in saving lives. The analysis clearly shows that early and more stringent lockdowns
have been effective in controlling the spread of the pandemic – both across countries and
across States in india.
By constructing a stringency index at the State level Survey show that the under-or-over
performance in cases and deaths (compared to the expected) correlates strongly with the
stringency of the lockdown. Similarly, the v- shaped economic recovery also strongly
correlates with the stringency of the lockdown. This alleviates concerns that the inference
about the impact of the lockdown is due to any cofounding factors peculiar to india such
as higher level of immunity, BCG vaccination, etc. As such India-specific factors are
common to all states, they cannot be accounting for this correlation. Thus, Survey infer
that the lockdown had a causal impact on saving lives and the economic recovery. india
thus benefited from successfully pushing the peak of the pandemic curve to September,
2020 through the lockdown. After this peak, india has been unique in experiencing
declining daily cases despite increasing mobility.

While there was a 23.9 per cent contraction in GdP in Q1, the recovery has been a
v-shaped one as seen in the 7.5 per cent decline in Q2 and the recovery across all key
economic indicators. in line with learning from economic research, economic activity in
States with higher intial stringency has rebounded faster during the year. on the economic
policy front, india recognized that, unlike previous crises, the Covid pandemic affects both
demand and supply. Furthermore, given disruptions in the labour markets that can affect
disposable income and firms suffering financial distress, the loss of productive capacity
due to hysteresis could not be ruled out. Therefore, a slew of structural reforms were
announced; together, these would help to expand supply significantly in the medium to long
term. on the demand side, at the onset of the pandemic, india’s policies focused purely on
necessities. This was optimal given the uncertainty and the resultant precautionary motives
to save as well as the economic restrictions during the lockdown. After all, pushing down
on the accelerator while the brakes are clamped only wastes fuel. during the unlock phase,
demand-side measures have been announced in a calibrated manner. A public investment
programme centred around the National infrastructure Pipeline is likely to accelerate this
demand push and further the recovery. The upturn in the economy while avoiding a second
wave of infections makes india a sui generis case in strategic policymaking amidst a once-
in-a-century pandemic.