COVID-19 PANDEMIC CONTAINMENT POLICIES AND THE TRADEOFFS WITH INDIA'S ECONOMY

Abstract

This study examines the impact of COVID-19 containment policies on economic activity in India using nighttime light intensity as a proxy. The study found that nationwide lockdown in March and April 2020 dimmed nighttime light intensity across the country. Recovery in May and subsequent months depended on the zone classification, with red zones experiencing lower recovery due to the severest restrictions. The effects of the zone classification tapered off in June and July 2020 but the impact of pandemic containment persisted even after restrictions were lifted. The study used household-level income and consumption patterns to corroborate its results. The paper also found that more developed districts with higher employment in services, population density, mean age, and credit per capita suffered larger impacts, suggesting that more developed districts do not necessarily have better capacity to absorb economic shock. However, the study further acknowledges that two caveats of using nighttime lights as a proxy for economic activity, such that the better tracking of economic activity in brighter areas may still bias the results and that the elasticity between nighttime lights and GDP may vary across contexts. This study, therefore, provides a timely analysis of the impact of the COVID-19 pandemic on economic activity in India