Policy response to the economic challenge from COVID‐19 in India: A qualitative enquiry

• Published date: 01 November 2020
• Author: Gagan Deep Sharma,Gaurav Talan,Mansi Jain
• Date: 01 November 2020
• DOI: http://doi.org/10.1002/pa.2206

ACADEMIC PAPER

Policy response to the economic challenge from COVID-19 in

India: A qualitative enquiry

GaganDeepSharma| GauravTalan | MansiJain

University School of Management Studies,

Guru Gobind Singh Indraprastha University,

New Delhi, India

Correspondence

Gagan Deep Sharma, University School of

Management Studies, Associate Director,

International Affairs, Guru Gobind Singh

Indraprastha University, Sector 16 C, Dwarka,

New Delhi, India.

Email: angrishgagan@gmail.com

The recent COVID-19 pandemic has not only resulted in the loss of human lives but

also distressed economies. The impact of this crisis is even higher in emerging econo-

mies like India due to already slowing growth rates, poor health infrastructure, and a

significant population living in extreme poverty. While the government is taking mea-

sures to handle this crisis, nobody can be sure if these measures are adequate, as this

will depend on how soon the spread of the virus is contained in the country. How-

ever, understanding the depth of the impact of COVID-19 pandemic on the Indian

economy is vital to formulate the policy and measures to contain this economic

impact. This paper attempts to understand the impact of COVID-19 pandemic on the

Indian economy by employing a qualitative research design, based on sentiment anal-

ysis to understand 15 industry experts' opinion concerning the socio-economic

impact of COVID-19. The study makes a theoretical as well as applied contribution

to the field of study. While theoretically, it contributes to the field of pandemic

research, public health management, and disaster management; in an applied sense,

we propose a set of measures for the policymakers based out in India, as well as in

other emerging nations of the world.

1|INTRODUCTION

The outbreak of pandemics has conventionally been leaving a lasting

impact on the global economy. Since the early twentieth century, pan-

demics like the Spanish Flu (1918–1920), Asian Flu (1957–1958),

H1N1 Swine Flu pandemic (2009–2010), West African Ebola epi-

demic (2014–2016), Zika Virus epidemic (2015-present day), and the

recent COVID-19 pandemic (2010-present day) have not only

resulted in the loss of human lives but also distressed economies (The

Economist, 2020a). The immediate effect of the ongoing COVID-19

pandemic can be seen on service-based businesses (O'Dea, 2020; The

Economist, 2020a), and informal economy (Chandrasekhar &

Ghosh, 2020) leading to a sharp spike in unemployment (International

Labour Organisation, 2020). COVID-19 pandemic has emerged at a

time when the global economy is more interconnected than ever

before. This interconnectedness has not only led to a rapid spread of

the virus across the globe but has also triggered a chain reaction of

economic disruptions (The Economist, 2020d). While manufacturers

and retailers are receiving fewer orders and are subsequently forced

to opt for production cuts, the banking sector is facing stressed loans

(Buehler et al., 2020; The Economist, 2020c), and the workforce

around the world is staring at job losses. The oil industry is also greatly

affected due to reduced demand in the global markets (Dunn & Sher-

man, 2020). However, certain sectors like tourism, restaurants, and

aviation are suffering the most due to lockdowns in different coun-

tries and reduced public movement (Krader & Vines, 2020;

Suneson, 2020; World Tourism Organisation, 2020). With lockdowns

emerging as the only way to contain the speed of spread of the virus,

the world faces a tough dilemma of saving lives through lockdown,

which is bound to create havoc for the livelihoods. Loss of lives and

the preventive measure of lockdown have a significant impact on the

global economy, and its financial aftershocks may even worsen with

time. Though the mortality rate of patients affected by COVID-19 is

low as compared with other epidemics in the past, its impact on the

economies is high in the present globalized world (World Economic

Forum, 2020a). COVID-19 pandemic is expected to cut the global

GDP growth rate by 1.5% (Organisation for Economic Co-operation

and Development, 2020).

Received: 15 May 2020Revised: 17 May 2020Accepted: 22 May 2020

DOI: 10.1002/pa.2206

J Public Affairs. 2020;20:e2206.wileyonlinelibrary.com/journal/pa© 2020 John Wiley & Sons, Ltd1of16

https://doi.org/10.1002/pa.2206

The impact of this crisis may even be higher in emerging econo-

mies like India due to already slowing growth rates, poor health infra-

structure, and a significant population living in extreme poverty. The

spread of COVID-19 has exacerbated the Indian economy, which was

already in perils, mainly due to slowing domestic demand and external

factors like the US–China trade war (Goyal, 2020). So much so that

Moody's had to cut its GDP forecast for 2020 for India to 2.5% (as

against 5.3%projected barely10 days ago)(Business Today,2020).

The immediate shocks from the lockdown during the COVID-19 pan-

demic include the collapse of the informal sector in India, which

employs nearly 80% of the country's employed population. To tackle

with this unprecedented challenge, the government of India

announced a relief package to the tune of 1% of the country's GDP,

reduced interest rates, extended realization period of export pro-

ceeds, loans and EMIs, and reduced the CRR. While the government

and central bank are taking these measures to handle this crisis,

nobody can be sure if these measures are adequate and effective, as

this will depend on how soon the spread of the virus is contained in

the country. However, understanding the depth of the impact of

COVID-19 pandemic on the Indian economy is vital to formulate the

policy and measures to contain this economic impact.

The response to COVID-19 pandemic requires a coordinated

effort like in any other disaster. International Federation of Red Cross

and Red Crescent Societies defines disaster as “a sudden, calamitous

event that seriously disrupts the functioning of a community or soci-

ety and causes human, material, and economic or environmental

losses that exceed the community's or society's ability to cope using

its own resources”where Disaster = (Vulnerability + Hazard)/ Capac-

ity (International Federation of Red Cross and Red Crescent Socie-

ties, 2020). UN Chief called COVID-19 pandemic as the most

challenging crisis since WW-II (Press Trust of India, 2020). India also

declared COVID-19 outbreak as a notified disaster (Hindustan

Times, 2020) and aims to systematically respond to this pandemic call-

ing its response so far as pro-active, pre-emptive, and graded (Times

Now, 2020).

This paper attempts to understand the impact of COVID-19 pan-

demic on the Indian economy by analyzing the interviews of

policymakers and experts on the Indian economy. The systematic

response of the policymakers to keep the economy afloat may be

studied by segregating these interviews in seven themes; (a) Current

economic measures taken by the government, (b) Fiscal policy deci-

sions and stimulus package, (c) Global outlook and challenges, (d)

GST-related measures, (e) Industry-specific measures, (f) Long-term

economic impacts of COVID-19 pandemic, and (g) Impact on small

businesses and daily wagers. Through a qualitative analysis of these

interviews, we attempt to assess their responses on the fiscal and

monetary space for handling this crisis; measures implemented or

planned; India's response in comparison with developed countries;

and long-term effects of COVID-19 pandemic on the Indian economy.

Our research questions pertain to the following–

1What is the sentiment of the economic experts about the impact of

COVID-19 on the Indian economy?

2What are the fiscal policy, monetary policy, GST, and other eco-

nomic measures required to manage the challenge being faced by

the Indian economy from COVID-19?

3What strategies and measures should be adopted to deal with the

economic challenges concerning the small and medium-sized enter-

prises, daily wage earners, migrant workers in India?

4 What measures must be adopted by the developing nations to

tackle the global challenges across the industries, including trade,

aviation, tourism, hospitality, and so forth?

5What are the long-term policies and measures required to deal with

the post-COVID crisis?

The paper is organized as follows. The present section introduces

the study and formulates the research questions; the second section

summarizes the existing literature on economic impacts of COVID-19;

the third section outlines the methodology used for this study; the

fourth section presents the results and analysis; the fifth section dis-

cusses the findings vis-à-vis available literature; the sixth section pre-

sents policy implications; and the seventh section concludes.

2|LITERATURE REVIEW

The COVID-19 outbreak is caused by the severe acute respiratory

syndrome, SARS-CoV-2 virus that first manifested in December 2019

in Wuhan city in Hubei province of China (The World Health Organi-

sation, 2020). The virus has spread elsewhere in China and to 24

other countries, including South Korea, Japan, Hong Kong, Iran,

France, Italy, Germany, and the USA (The Economist, 2020b; Thomp-

son, 2020). While the cases in China reported a drop for the fourth

consecutive day on 29 March 2020 (France 24, 2020), cases from

other countries continued to rise despite more robust medial stan-

dards and practices (The Economist, 2020a). The outbreak revived the

memories of a similar previously known virus, namely, 2019-nCoV

(SARS), which started from Guangdong province of China and went

on to generate cases in 37 countries between 2002 and 2003

(Smith, 2006). However, SARS was then controlled, but the potential

evolution of coronavirus is still not well understood (Cohen &

Normile, 2020; M. D. Wang & Jolly, 2004). Amidst the significant pub-

lic health risk being posed by COVID-19 to the world, the World

Health Organization (WHO) declared a public health emergency of

international concern and pronounced COVID-19 as a global pan-

demic (WHO, 2020).

Research, based on the surveillance and control of infectious dis-

eases, as well as their impact on economic development has recently

gained momentum (Brahmbhatt & Dutta, 2008). This attention is fur-

ther restored by the emergence of many new infectious diseases

namely—severe acute respiratory syndrome (SARS), bovine

spongiform encephalopathy (BSE), and H5N1 subtype influenza A,

that are anticipated to continue emerging; anti-biotic resistant bacte-

rial infections including tuberculosis and methicillin-resistant Staphylo-

coccus aureus (MRSA); zoonoses such as SARS, avian influenza, and

Lyme disease; HIV/AIDS, tuberculosis, and malaria; and epidemic

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