Context: The revelation that GDP has shrunk by nearly 24 per cent confirmed that the damage to the Indian economy was amongst the most severe globally.
Why did India perform so badly relative to other countries?
- First, India had one of the world’s most draconian lockdowns.
- Second, unlike other countries, India was far more parsimonious in its fiscal response.
- Third, the economy was in a classic balance sheet crisis before the pandemic began.
- The major engines of growth — consumption, investment, and exports — had been decelerating since the end of 2018.
- The pandemic aggravated the already frayed finances of corporates, banks and shadow banks.