Page 57 - ES 2020-21_Volume-1-2 [28-01-21]

40 Economic Survey 2020-21 Volume 1

LOOKING FORWARD
1.59 The V-shaped economic recovery while avoiding a second wave of infections make
India a sui generis case in this unique, synchronized global recession. Despite the hard-
hitting economic shock created by the global pandemic, India is witnessing a V-shaped
recovery with a stable macroeconomic situation aided by a stable currency, comfortable
current account, burgeoning forex reserves, and encouraging signs in the manufacturing
sector output. India is reaping the “lockdown dividend” from the brave, preventive measures
adopted at the onset of the pandemic, which were based on the humane principle advocated
eloquently in the Mahabharata that “Saving a life that is in jeopardy is the origin of dharma.”
The policy maturity and the alacrity displayed to not “waste a crisis” has helped the country
to save both ‘lives’ and ‘livelihoods’ in its own unique way and has shifted the focus away
from the short-term pain created by the crisis to the potential for long-term gains engendered
by the policy response.

CHAPTER AT A GLANCE

 The COVID-19 pandemic engendered a once-in-a-century global crisis in 2020. Faced
with unprecedented uncertainty at the onset of the pandemic, India focused on saving
lives and livelihoods by its willingness to take short-term pain for long-term gain.

 India’s response stemmed from the humane principle that while GDP growth will recover
from the temporary shock caused by an intense lockdown, human lives that are lost cannot
be brought back.

 The response drew on epidemiological and economic research, especially those pertaining
to the Spanish Flu, which highlighted that an early, intense lockdown provided a win-win
strategy to save lives, and preserve livelihoods via economic recovery in the medium to
long-term. This strategy was also tailored to India’s unique vulnerabilities to the pandemic.

 The strategy was also motivated by the Nobel-Prize winning research in Hansen & Sargent
(2001) that recommends a policy focused on minimizing losses in a worst case scenario
when uncertainty is very high. Faced with an unprecedented pandemic and the resultant
uncertainty, loss of scores of human lives captured thus the worst case scenario.

 India’s strategy flattened the curve, pushed the peak to September, 2020, and helped
transform 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. After the September peak,
India has been unique in experiencing declining daily cases despite increasing mobility.

 While the lockdown resulted in 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.

 Unlike previous crises, the COVID pandemic affects both demand and supply. India was
the only country to announce a slew of structural reforms to expand supply in the medium
to long term and avoid long-term damage to productive capacities.