- India imposed a strict lock-down from 25th March, 2020. April, 2020 was the month of economic tandstill with restrictions on various activities eased in May, 2020.
- As restrictions were further eased, the country entered the unlock phase in June, 2020.
The Supply & Demand side shock
- The loss of economic output from more than two months of lock-down was first triggered from the supply side as labour stayed away from work.
- The demand side caused further loss of output as consumption of goods and services dependent on customer mobility fell.
- This twin supply-demand shock on output subsequently led to loss of income, which caused further decline in consumption resulting in further loss of output.
- Owing to these unprecedented COVID-19 induced supply-demand shocks, IMF’s June, 2020 WEO update projects growth of India’s output at (-)4.5% in 2020-21 and that of world’s at (-)4.9%.
- While the biggest reason for the unprecedented contraction is the lockdown forced by the pandemic,
- The economic growth had been slowing down even before that.