Here is How Lockdowns Have Hit India’s GDP Growth

As the second wave of COVID-19 in India is once again endangering lives and the economy, let's look at the impact of COVID-19 lockdowns on India's GDP.

The Indian economy shrank by a whopping 23.9% in 2020 due to COVID-19 induced lockdowns. The contraction did not surprise many as the Indian economy was already dramatically slowed down way before the pandemic hit. 

Regardless, the sharp decline in the GDP has been disastrous for small businesses and the large segment of Indian MSMEs, who continue to suffer doubly – on health emergency and economic deprivation fronts. 

2020 and Lockdown – A Disaster for India’s GDP

Since the first quarterly data was released in 1996, India had the lowest record for the April-June quarter in 2020 for the first time. It was worse than the 21.7% drop in Britain’s economy, the worst among the 20 largest economies in the world.


By and large, the average annual growth of the Indian economy and GDP has been around 7% since the economic liberalisation of the 1990s.

The GDP growth rate in April-September 2020 contracted by 15.7 per cent compared with a 4.8 per cent growth in the same period of 2019. In 2020, the state of millions of excluded migrant workers made it clear that the COVID induced lockdowns had the worst impact on the MSME sector and small business in India. That is why the government established the Atmanirhbar Package for aiding MSMEs and India’s vulnerable. But the scheme fell short of its objectives and widely focused on loan guarantees than actual cash relief.

With a Lockdown in View, 2021 Also Looks Bleak

In the second week of April, India’s business activity has started to drop dramatically, and the economic situation could deteriorate further as COVID cases are skyrocketing. The Nomura India Business Resumption Index, which tracks high-frequency economic indicators like financial mobility, is about 16 percentage points below the normal levels. 

Although India has not yet declared a national lockdown, severe national bottlenecks to curb the cases severely impact businesses, especially small, medium and micro-companies. Economic activities are getting affected across the country due to curbs imposed by states amid a surge in COVID-19 cases. 

The Nomura Care ranking has also reduced the estimated GDP growth value of the GDP for the 2021-22 fiscal year to 10.2% from the previous estimate of 10.9. As India has no choice but to tighten restrictions due to deaths and accidents, more businesses may be affected in the coming months. Economists indicate that the economic impact of the second wave could intensify in the next few weeks due to lower mobility. 

However, energy demand and occupancy rates remained essentially unchanged. Companies in the aviation, automotive, tourism, hospitality, restaurants and other sectors are likely to be subjected to new government restrictions to contain the disease. But one sure thing is that the Indian economy, and indeed India’s small businesses, cannot bear another nationwide lockdown.

Aakash Sharma
Aakash Sharma
Aakash writes on Startup Ecosystem, Policies, Legal and Regulatory aspects of business planning. An alumnus of Delhi University, he is assistant editor at Dutch Uncles.



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