Covid-19 pandemic and economic performances of the states in India

ABSTRACT

Using state-level aggregate data from India, this paper examines the impact of Covid-19 pandemic and its containment efforts on macroeconomic performance after controlling for several initial conditions, the structure of the state economies, and healthcare and public health capabilities. A panel regression analysis based on state-level monthly unemployment data from April to November 2020 indicates that states experiencing higher spread of Covid-19, with adverse initial economic conditions, and larger employment dependence on secondary and tertiary sector have suffered significantly larger economic losses. In contrast, states with better containment strategy, higher healthcare capabilities, and a relatively larger employment share of the primary sector have experienced smaller economic losses. Further, the nationwide lockdown during the months of April and May had significant adverse effects on the state economies. Finally, the spread of the virus interacts with each of the above factors to significantly impact state economic performances. These results are informative not only for policies and strategies for short and long-term recovery of the state economies in India but also for understanding actual and potential economic impacts of the pandemic acrosscountries. © 2021 Economic Society of Australia, Queensland