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Impact of COVID-19 Pandemic Risk and Lockdown on the Indian Economy

In: Environmental, Social, and Governance Perspectives on Economic Development in Asia

Author

Listed:
  • Soumya Bhadury
  • Vidya Kamate
  • Siddhartha Nath

Abstract

The study provides medium-term estimates of recovery paths for Indian economy using a dynamic factor (DF)-based approach that employs data on high-frequency indicators à la Bhadury, Ghosh, and Kumar (2020). The DFs are used to analyze the post-pandemic recovery and convergence with its pre-COVID-19 trend for India between March 2021 and March 2022. A broad sectoral assessment of the impact of COVID-19 is also conducted. In addition, forward-looking measures based on stock returns are used to analyze the transmission of additional banking sector risks to the real sectors by constructing daily delta conditional value-at-risk (CoVaR) estimates. Our estimates based on the DFs suggest that the aggregate economic activities may catch up to the estimated pre-COVID trend by March 2021 predominantly driven by the growth in services sector. The industrial sector and consumer goods sector continue to show moderate signs of recovery. Our CoVaR estimates corroborate these findings. Banking sector transmission risk is among the lowest for services such as healthcare and information technology (IT), for both the lockdown period between March 25 and June 8, 2020, and for the latter months. The transmission risk continues to remain high for metal, oil and gas, and capital goods sector. Broadly, the evidence on forward-looking banking sector risk transmission for major sectors is in alignment with our finding on their recovery based on DF models, after easing of COVID-19 lockdown.

Suggested Citation

  • Soumya Bhadury & Vidya Kamate & Siddhartha Nath, 2021. "Impact of COVID-19 Pandemic Risk and Lockdown on the Indian Economy," International Symposia in Economic Theory and Econometrics, in: Environmental, Social, and Governance Perspectives on Economic Development in Asia, volume 29, pages 169-188, Emerald Group Publishing Limited.
    • Handle: RePEc:eme:isetez:s1571-03862021000029b032
    DOI: 10.1108/S1571-03862021000029B032
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    More about this item

    Keywords

    COVID-19; pandemic risk; recovery paths; value-at-risk; risk transmission; dynamic factor model; E01; E17; G10;
    All these keywords.

    JEL classification:

    • E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts
    • E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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