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4 Economic Survey 2020-21 Volume 1

portion of the global economy, thereby triggering a global recession this year. The world economy
is estimated to contract in 2020 by 4.3 per cent, as per World Bank, and 3.5 per cent, as per IMF.
The crisis World is facing today is unique in a number of ways. Firstly, the health crisis-induced
global recession is in contrast with previous global recessions which were driven by confluences
of a wide range of factors, including financial crises (the Great Depression in 1930-32; 1982;
1991; 2009), sharp movements in oil prices (1975; 1982), and wars (1914; 1917-21; 1945-46).

1.5 Secondly, this recession is highly synchronized as the fraction of economies experiencing
annual declines in national per capita is highest since 1870—more than 90 per cent, even higher
than the proportion of about 85 per cent of countries in recession at the height of the Great
Depression of 1930-32 (Figure 2). The pandemic is, therefore, once in a 150-year event with an
unprecedented impact with all regions in the world projected to experience negative growth in
2020. It is aptly called the ‘Great Lockdown’.

Figure 2: Once-in-a-Century ‘Synchronized’ Recession

Source: World Bank
Note: Recession is defined here as contraction in per capita income
1.6 Thirdly, the present crisis is unique as it originated in a pandemic that required social
distancing and limiting of physical interactions. Thus, inherent to the crisis there was the trade-
off – at least in the short run – between health and human lives, on the one hand, and the economy
and livelihoods, on the other hand. Specifically, containment measures, necessary to manage the
pandemic and save lives, limited human interactions and thereby restricted economic activities
of various hues and exacerbated the impact on livelihoods. Thus, the COVID crisis presented a
trade-off between lives and livelihoods, in the short run.

1.7 The short-run trade-off presented countries with policy options that revealed
policymakers’ preferences for the “value” placed on human life versus the “price” of
temporary economic restrictions. Unlike Oscar Wilde’s cynic, “who knows the price of
everything and the value of nothing,” India’s policy response to the pandemic stemmed
fundamentally from the humane principle advocated eloquently in the Mahabharata that
“Saving a life that is in jeopardy is the origin of dharma.” Therefore, the “price” paid
for temporary economic restrictions in the form of temporary GDP decline is dwarfed by
the “value” placed on human life. As the Survey demonstrates clearly, using a plethora