Unpacking India’s fiscal responses to COVID-19: a computable general equilibrium modelling analysis

This study analyzes the impact of COVID-19 on Indian economy with and without compensatory fiscal policy scenarios. Based on available evidences we have explained various channels of economic impact of COVID-19. A computable general equilibrium model with multiple households has been developed for empirical analysis with equity aspect. Further, we have decoded government relief packages for COVID-19 in coherence with the aforesaid impact channels and identified key parameter that are driving factor for economic system during pandemic. Results of our model reveals that the COVID-19 relief packages in India saved almost 3% loss in GDP. Whereas, spending Rs. 5 trillion fiscal incentive as a cash incentive to producers could have resulted only 4% fall in GDP. Again, the government relief packages helped more to the rural households to overcome their crisis than urban households. Whereas incentivizing production addresses this equity issue by increasing employment and households’ income across all region and classes.