Who bore brunt of income losses in CY20 as India battled coronavirus?

 Almost four-fifths of all income losses were incurred by households and the corporate sector

Every economy in the world suffered economic/income losses in CY20. The ‘sudden stop’ forced authorities to react with a quick, massive, and unconditional fiscal/monetary support last year. As in other crises, however, these measures did not prevent losses, though they definitely helped mitigate them. Assuming that income growth in CY20 would have been the same as in CY19, my calculations suggest that total income losses incurred by the Indian economy amounted to 10.6% of GDP (totaling $315b) in CY20. This was lower than losses worth 12.7% of GDP in Spain (ES) but almost double that in Australia (5.8% of GDP) and the US (6% of GDP).

What, however, is more important to learn is the distribution of these losses among three domestic participants, namely, households, corporate and the government? This is vital because it helps us understand: a) if, and how, the situation is different in India vis-à-vis other major economies, b) how different fiscal responses led to varied implications for the private sector, and c) implications on the strength of the recovery, as and when it happens. Lastly, this analysis also provides a key lesson to be avoided during the second wave.

The estimation of the distribution of income losses by different sectors in India (IN) is not an easy task. There are two ways of estimating such losses--either the national statistical agencies publish gross disposable income (GDI) data with details on a regular basis, and/or the government releases sectoral data on gross savings, which can then be added to consumption spending to arrive at GDI. For many advanced economies, data on both parameters are easily available. However, for India, neither income nor savings data by sector are available on a regular basis. The Central Statistics Office (CSO), the data publishing arm of the Government of India, publishes sectoral income and savings data only on an annual basis, with a lag of 10 months. Thus, FY21 data will be available at the end of Jan’22.