Lockdown and GDP Contraction in India: A National Income Perspective

Abstract

The present study derives an estimate of the contraction of the GDP in India during the lockdown period on the basis of the fall in the components of expenditure of the national income accounts. On the lower side the contraction is estimated to be around Rs. 7211.42 Billion per month at the constant 2011-12 prices during the total lockdown period in this quarter which is 58.08% of the GDP forecast had there been no lockdown. This translates into Rs. 10341.17 Billion per month at current prices. One important component of this study is the derivation of an estimate of the additional fall in the private final consumption expenditure of a large chunk of the Indian population who lost their means of livelihood during the lockdown period. This is called unemployment effect in the paper and is estimated by a method based on a counterfactual from the 68th Round of National Sample Survey data. The unemployment effect is found to be Rs. 712.59 Billion at 2011-12 constant prices for the quarter, which is a decline of 48% in private final consumption. This translates into a fall of Rs. 1021.54 Billion at current prices. The methodology proposed here is particularly useful for the developing countries where the extent of transactions are cashless/ digitized limited. The estimate of the contraction is, however, based on the currently available data, it can further be replaced by a better estimate as and when fresh data is made available.