India tried to tame COVID-19 by sacrificing its economy. It got the worst of both worlds instead

September 1, 2020, 1:24 PM UTC

In late March, India’s Prime Minister, Narendra Modi, declared a nationwide 21-day lockdown to stop the spread of the coronavirus among the population of 1.3 billion. It was one of the strictest in the world, with the government confining people to their homes, suspending transport networks, and closing almost all businesses, offices, and places of worship.

Implicit in India’s lockdown was the social contract that governments and citizens have entered into worldwide: short-term economic sacrifice in exchange for the public health benefit of slowing the spread of COVID-19.

But the tradeoff never materialized.

In fact, India—far more than its peers—is now getting the worst of both worlds. Its economy is experiencing its deepest recession since it started publishing gross domestic product numbers in 1996, and it has the fastest-growing number of coronavirus cases of any country on earth.

‘An exceptional contraction’

India’s gross domestic product shrank nearly 24% in the second quarter of 2020 compared with the same period last year, the country revealed Monday. The contraction is the country’s biggest in decades and the worst second-quarter decline among the world’s top five economies. (The U.S. economy, by comparison, shrank 9.5% in the second quarter.)

India’s agricultural sector grew 3.4% in the second quarter, compared with the same period last year, but besides that, the results were grim. The construction industry shrank 50%, manufacturing shrank 39%, and trade, hotels, and other services shrank 47%.

India’s economy—the world’s fastest-growing as recently as 2018—was already weakening, the result of a credit slowdown. The pandemic sent it spiraling.

“This is an exceptional contraction even if you compare it with other countries in the pandemic,” says Amitendu Palit, senior research fellow at the National University of Singapore’s Institute of South Asian Studies.

Locking down and opening up

Some economic hardship was certainly expected, given the nation’s lockdown, but the way in which India imposed its coronavirus restrictions undercut any public health benefit and complicated any rebound.

Modi announced the lockdown at 8 p.m. on March 24, and said the lockdown rules would take effect at midnight, just four hours after the televised announcement.

Indias Economy Faces Worst Quarterly Slump Ever After Lockdown
A view of the street near the Central Secretariat buildings in New Delhi on Aug. 31, 2020. Once the world’s fastest-growing major economy, India posted the steepest quarterly decline in GDP among the world’s top five economies.
Anindito Mukherjee/Bloomberg via Getty Images

Chaos ensued, as hundreds of thousands of migrant workers were suddenly stranded in the cities where they worked, bereft of any source of income, with nowhere to shelter in place. Many people trekked on foot back to their home villages hundreds of miles away, contributing to the spread of the coronavirus across the country.

Widespread joblessness and economic damage pushed the government to ease lockdown measures in ongoing phases starting in June, even as India’s caseload ticked up.

Some two months later, public health systems across the country are straining to cope with coronavirus patients. Tests are scarce owing to overwhelming demand. There is no national mask mandate; in fact, the Ministry of Health advises that masks be worn only if a person is sick with COVID-19 symptoms or caring for someone who may have the disease.

India’s official coronavirus case tally stands at 3.69 million—third behind the U.S. and Brazil—with 65,000 reported deaths, though serological surveys in cities like Pune, Mumbai, and New Delhi indicate that the virus is much more widespread than the official numbers show. As many as 65% of surveyed people in some especially crowded areas had antibodies indicating they had contracted and recovered from COVID-19.

Shubhojit Ghose, a young professional in Bangalore, a city of 8.5 million in southern India that logged 2,821 cases on Monday, says the current situation in public places like supermarkets is “a mess,” with people crowding together, seemingly unworried about the spread of the virus. “It’s just not safe,” he said.

In Ghose’s view, India should have eased into its initial lockdown. Now, the public has no tolerance for trying it again, even as cases rise.

“We had to open up because of the economy,” he said. “[It’s] getting really bad. There’s no panic about it at all.”

“India went through a severe lockdown,” said Palit. “But the purpose of that lockdown hasn’t been served.”

Getting things under control

India’s dual crises—a flailing economy and an unchecked public health catastrophe—have left the government with few options, says Palit.

In May, India released a $266 billion stimulus package, worth nearly 10% of the country’s annual GDP. But Palit says it will struggle to offer any additional relief.

“[Government] revenue generation is at an all-time low” owing to the financial impacts of the lockdown, he said.

A man and his daughter visit a reopened temple in Chennai on Sept. 1, 2020, as the government eased a nationwide coronavirus lockdown. The lockdown, one of the world’s strictest, has not snuffed out the spread of the disease.
ARUN SANKAR/AFP via Getty Images

The resources that India does have will likely be spent on trying to get the pandemic under control.

“The government needs to spend money for COVID-19 management and a vaccine program,” said Palit.

Prospects for recovery

The government is likely expecting better numbers in the third quarter, Palit says, since the period will reflect the economic reopening. (In June, the International Monetary Fund projected the Indian economy to contract 4.5% for the year; its economy grew by 3.1% in the first quarter.)

But any rebound is precarious, as the virus continues to spread.

Ghose says he has been able to work remotely for a company based in New Delhi amid the pandemic, but his father, who works for a manufacturing company with factories near Bangalore, has not fared as well. His father’s plants have reopened after India’s lockdown, but have done so cautiously.

“If there is a single worker that comes to the plant with COVID, [the company] has to shut it down,” he said.