Impact of COVID-19 pandemic on the Indian economy: A critical analysis

Publication Type:

Journal Articles


Investigacion Economica, Volume 80, Issue 315 (2021)



Covid-19, fiscal stimulus, India, Indian Economy, input-output, Lockdown


This paper is an analysis of the economic impact of the Covid-19 pandemic in India. Even prior to the pandemic, the Indian economy was marked by a slowdown of economic growth and record increases in unemployment and poverty. Thus, India’s capacity to deal with a new crisis was weak when the pandemic hit in March 2020. The economic crisis after March 2020 affected all the sectors of the Indian economy. In agriculture, farmers were faced with broken supply chains, lack of market outlets, poor demand and falling output prices. In industry, micro and small enterprises were the most acutely affected. The crisis led to a loss of employment to the tune of at least 15 million. Using an Input-Output (I-O) framework, we create four scenarios of losses to the Indian economy. We estimate that India’s GDP growth rate in 2020-2021 may range from –4.3% to –15%. The government’s economic response till October 2020 was seriously deficient on demand side interventions. The government was hesitant to expand budgetary spending because it feared a rise in fiscal deficit. Given this fiscal stance of policy, the chances of an early revival in the Indian economy appear dismal.