COVID-19 Pandemic and Macroeconomic Uncertainty: Indian Economic Outlook

The nature of recession today because of the outbreak of COVID-19 is completely different from that of Great recession of the 1930s and macroeconomic risks brought on by the pandemic could be severe. There is a trade-off between the severity of the recession and the health consequences of the pandemic. The containment policies undertaken by the State in most of the countries including India in the form of economic lockdown primarily to maintain social distance exacerbate recession but raise welfare by reducing the probability of new infection and death toll caused by the pandemic. Different sectors of the economy will be affected adversely depending upon its intensity, spread and duration of the pandemic. Till now, as the cost of externality is very high because of absence of vaccination and treatment of this disease, the State has to impose more aggressive policy in the form of near complete lockdown or in some cases complete lockdown of the economy to reduce the probability of being infected. Total number of infected people and number of death due to this disease is significantly less in India till now despite the country has the highest population density and more populous than USA and Italy. But, daily growth rate of infected people is significantly higher (above 10 per cent) than the rate even in USA (3.5 per cent) as on April 19, 2020. In India, although absolute number of death is the least compared to other countries, the death rate is larger than the rate in USA, the country showing the highest death toll in the pandemic.