The economic impact of the COVID-19 pandemic in India has been largely disruptive. India's growth in the fourth quarter of the fiscal year 2020 went down to 3.1% according to the Ministry of Statistics. The Chief Economic Adviser to the Government of India said that this drop is mainly due to the coronavirus pandemic effect on the Indian economy. Notably, India's economy had already been slowing pre-pandemic, with GDP growth falling from 8.3% in 2016 to 4.0% in 2019 (World Bank Data), the current pandemic has "magnified pre-existing risks to India's economic outlook".
The World Bank and rating agencies had initially revised India's growth for FY2021 with the lowest figures India has seen in three decades since India's economic liberalization in the 1990s. However, after the announcement of the economic package in mid-May, India's GDP estimates were downgraded even more to negative figures, signaling a deep recession. (The ratings of over 30 countries have been downgraded during this period.) On 26 May, CRISIL announced that this will perhaps be India's worst recession since independence. State Bank of India research estimates a contraction of over 40% in the GDP in Q1. The contraction will not be uniform, rather it will differ according to various parameters such as state and sector. On 1 September 2020, the Ministry of Statistics released the GDP figures for Q1 (April to June) FY21, which showed a contraction of 24% as compared to the same period the year before.
According to Nomura India Business Resumption Index economic activity fell from 82.9 on 22 March to 44.7 on 26 April. By 13 September 2020 economic activity was nearly back to pre-lockdown. Unemployment rose from 6.7% on 15 March to 26% on 19 April and then back down to pre-lockdown levels by mid-June. During the lockdown, an estimated 140 million (140 million) people lost employment while salaries were cut for many others. More than 45% of households across the nation have reported an income drop as compared to the previous year. The Indian economy was expected to lose over every day during the first 21-days of complete lockdown, which was declared following the coronavirus outbreak. Under complete lockdown, less than a quarter of India's $2.8 trillion economic movement was functional. Up to 53% of businesses in the country were projected to be significantly affected. Supply chains have been put under stress with the lockdown restrictions in place; initially, there was a lack of clarity in streamlining what an "essential" is and what is not. Those in the informal sectors and daily wage groups have been at the most risk. A large number of farmers around the country who grow perishables also faced uncertainty.
Major companies in India such as Larsen & Toubro, Bharat Forge, UltraTech Cement, Grasim Industries, Aditya Birla Group, BHEL and Tata Motors temporarily suspended or significantly reduced operations. Young startups have been impacted as funding has fallen. Fast-moving consumer goods companies in the country have significantly reduced operations and are focusing on essentials. Stock markets in India posted their worst losses in history on 23 March 2020. However, on 25 March, one day after a complete 21-day lockdown was announced by the Prime Minister, SENSEX and NIFTY posted their biggest gains in 11 years. The Government of India announced a variety of measures to tackle the situation, from food security and extra funds for healthcare and for the states, to sector related incentives and tax deadline extensions. On 26 March a number of economic relief measures for the poor were announced totaling over . The next day the Reserve Bank of India also announced a number of measures which would make available to the country's financial system. The World Bank and Asian Development Bank approved support to India to tackle the coronavirus pandemic.
The different phases of India's lockdown up to the "first unlock" on 1 June had varying degrees of the opening of the economy. On 17 April, the RBI Governor announced more measures to counter the economic impact of the pandemic including special finance to NABARD, SIDBI, and NHB. On 18 April, to protect Indian companies during the pandemic, the government changed India's foreign direct investment policy. The Department of Military Affairs put on hold all capital acquisitions for the beginning of the financial year. The Chief of Defence Staff has announced that India should minimize costly defense imports and give a chance to domestic production; also making sure not to "misrepresent operational requirements".
On 12 May, the Prime Minister announced an overall economic stimulus package worth . Two days later the Cabinet cleared a number of proposals in the economic package including a free food grains package. In December 2020, a Right to Information petition revealed that less than 10% of this stimulus had been actually disbursed. By July 2020, a number of economic indicators showed signs of rebound and recovery. On 12 October and 12 November, the government announced two more economic stimulus package, bringing the total economic stimulus to . By December 2021, India was back to pre-COVID-19 growth.
Government actions Globally in a poll by the 'Edelman Trust Barometer', out of the 13,200+ people polled, 67% agreed that "The government's highest priority should be saving as many lives as possible even if it means the economy will recover more slowly"; that is, life should come before livelihood. For India, the poll showed a ratio of 64% to 36%, where 64% of the people agreed that saving as many lives as possible was a priority, and 36% agreed that saving jobs and restarting the economy was the priority.
In India the life versus livelihood debate also played out, with the government first announcing that life would be prioritized over livelihood, which later changed to an equal importance being given to life and livelihood. By mid-May the center was keen to resume economic activities, while the Chief Ministers had mixed reactions.
Prime Minister Modi announced the first 21 days of India's lockdown on 24 March. During this address to the nation he said, "Jaan hai toh jahaan hai" (). On 11 April, in a meeting with the Chief Minister's of India, the Prime Minister said "Our mantra earlier was jaan hai toh jahaan hai but now it is jaan bhi jahaan bhi ()." On 14 April, another address to the nation was made by Modi in which he extended the lockdown, with adjustments, to 3 May. In the Prime Minister's fifth meeting with the Chief Ministers on 11 May, the Prime Minister said that Indians must prepare for the post coronavirus pandemic world, just as the world changed after the world wars. During the meeting Modi said "Jan se lekar jag tak" () would be the new principle and way of life. On 12 May, the Prime Minister addressed the nation saying that the coronavirus pandemic was an opportunity for India to increase self-reliance. He proposed the Atmanirbhar Bharat Abhiyan (Self-reliant India Mission) economic package.
Timeline
2020 On 19 March the formation of the COVID-19 Economic Response Task Force was announced by Prime Minister Narendra Modi during his live address to the nation. The task force was led by the finance minister Nirmala Sitharaman. Though not formally constituted or no official date for relief packages being made, the consultation process with concerned parties had begun immediately. The Ministry of Finance immediately started consultations with the RBI and ministries to take stock of most affected sectors like aviation, hospitality, and MSMEs. On 21 March 2020, the Union cabinet approved incentives worth for electronic manufacturing. Various state governments announced financial assistance for the poor in the unorganised sector. On 21 March the Uttar Pradesh government under Chief Minister Yogi Adityanath decided to give a direct money transfer of to all daily wage laborers in the state and the following day Punjab announced each for all registered construction workers in the state. On 23 March it was announced that Haryana labourers, street vendors and rickshaw pullers will be provided an assistance of ₹1,000 per week directly deposited into their bank accounts. Below Poverty Line families would be provided rations (including rice, wheat, mustard oil, sugar) free of cost for the month of April. On 24 March in his address to the nation, the Prime Minister announced a fund for the healthcare sector. On 24 March the Finance Minister made a number of announcements related to the economy such as extending last dates for filing GST returns and income tax returns. The due dates for the Sabka Vishwas (Legacy Dispute Resolution) Scheme 2019, customs clearances and for compliance matters under the Customs Act and associated laws was extended to June 2020.
Lockdown Phase 1 (25 March – 14 April) On 25 March the Modi government announced the world's largest food security scheme for 800 million people across the country. Cabinet Minister Prakash Javadekar made the announcement in a press conference that the ration would be 7 kg every month (which would include wheat at a cost of per kg and rice at per kg.) On 25 March the Uttar Pradesh government banned people from doing the manufacture and sale of pan masala, stating in the order that "spitting pan masala can help in spreading Covid-19". Following this, other states such as Andhra Pradesh, Rajasthan and Gujarat also banned spitting in public places. On 26 March the Finance Minister announced a number of economic relief measures for the poor and hungry amid the lockdown. Pradhan Mantri Ujjwala Yojana beneficiaries will get free cylinders for at least three months. This will benefit over 80 million Below Poverty Line families. The government would expedite payment of the first installment (₹2,000) due in 2020–21 in April itself under the Pradhan Mantri Kisan Samman Nidhi (PM-KISAN). For the organised sector worker, the government will pay the Employees' Provident Fund (EPF) contributions of both sides for 8 million employees of small companies who earn up to ₹15,000 a month. The raise in the threshold from ₹100,000 to ₹10 million for triggering insolvency proceedings under the Insolvency and Bankruptcy Code (IBC) was done to help MSMEs. State governments were given various instructions and guidelines such as diverting district mineral funds for health needs relating to the pandemic. On 26 March India participated in the virtual 'Extraordinary G20 Leaders' Summit'. The G20 nations decided to inject over $5 trillion into the global economy to counteract the pandemic's impacts. They agreed to work together, to strengthen the World Health Organisation, develop a vaccine and make it available. They decided to share timely and transparent information, materials for research and development and data. Besides expanding manufacturing capacity for medical supplies, they agreed to ensure smooth flows of critical supplies.G20 Leaders' Statement, Extraordinary G20 Leaders' Summit Statement on COVID-19 . Retrieved 5 April 2020. On 27 March the Reserve Bank of India (RBI) Governor Shaktikanta Das made a number of announcements including EMIs being put on hold for three months and reducing Repo Rates. Other measures introduced will make available a total to the country's financial system. Delhi government announced that from the 28th they will be providing free food to 400,000 every day. Over 500 hunger relief centres have been set by the Delhi government. On 27 March the Rajasthan government decided to deduct the salaries of all its officers and employees from one to five days, with the money going into the Chief Ministers Fund. On 28 March the Prime Minister launched a new fund called PM CARES fund for combating coronavirus-like situations. On 30 March it was announced that the UP government would transfer to 2,715,000 workers under MNREGA scheme.