Saving Lives and Livelihoods amidst a Once-in-a-Century Crisis | Economic Survey & Government Reports - UPSC PDF Download

 Page 1


CHAPTER
01
Saving Lives and Livelihoods  
Amidst a Once-in-a-Century Crisis
Saving a life that is in jeopardy is the origin of dharma 
– Mahabharata (Shanti parva), Chapter 13, Shloka 598
The Covid-19 pandemic engendered a once-in-a-century global crisis in 2020 – a unique 
recession where 90 per cent of countries are expected to experience a contraction in Gd P 
per capita. Faced with unprecedented uncertainty at the onset of the pandemic, india 
focused on saving lives and livelihoods by its willingness to take short-term pain for long-
term gain. india’s response stemmed from the humane principle advocated eloquently in 
the Mahabharata that “Saving a life that is in jeopardy is the origin of dharma.” Therefore, 
india recognised that while Gd P growth will recover from the temporary shock caused 
by the pandemic, human lives that are lost cannot be brought back. The response drew on 
epidemiological and economic research, especially those pertaining to the Spanish Flu, 
which highlighted that an early, intense lockdown provided a win-win strategy to save 
lives, and preserve livelihoods via economic recovery in the medium to long-term. The 
strategy was also motivated by the Nobel-Prize winning research in Hansen & Sargent 
(2001) that recommends a policy focused on minimising losses in a worst case scenario 
when uncertainty is very high. Faced with an unprecedented pandemic and the resultant 
uncertainty, loss of scores of human lives captured thus the worst-case scenario. 
This strategy was also tailored to india’ s unique vulnerabilities to the pandemic. First, as the 
pace of spread of a pandemic depends upon network effects, a huge population inherently 
enables a higher pace of spread. Second, as the pandemic spreads via human contact, high 
population density, especially at the bottom of the pyramid, innately aids the spread of the 
pandemic at its onset. Third, although the average age is low, india’s vulnerable elderly 
population, in absolute numbers, exceeds significantly that of other countries. Finally, an 
overburdened health infrastructure exposed the country to a humongous supply-demand 
mismatch that could have severely exacerbated fatalities. in fact, assessments of crores 
of cases and several thousands of deaths by several international institutes in March and 
April possibly reflected the concerns stemming from such vulnerabilities.
To implement its strategy, india imposed the most stringent lockdown at the very onset of 
the pandemic. This enabled flattening of the pandemic curve and, thereby, provided the 
necessary time to ramp up the health and testing infrastructure. Faced with enormous 
????  ?? ????? ? ?? ?????? ?? ?????
???? ?
Page 2


CHAPTER
01
Saving Lives and Livelihoods  
Amidst a Once-in-a-Century Crisis
Saving a life that is in jeopardy is the origin of dharma 
– Mahabharata (Shanti parva), Chapter 13, Shloka 598
The Covid-19 pandemic engendered a once-in-a-century global crisis in 2020 – a unique 
recession where 90 per cent of countries are expected to experience a contraction in Gd P 
per capita. Faced with unprecedented uncertainty at the onset of the pandemic, india 
focused on saving lives and livelihoods by its willingness to take short-term pain for long-
term gain. india’s response stemmed from the humane principle advocated eloquently in 
the Mahabharata that “Saving a life that is in jeopardy is the origin of dharma.” Therefore, 
india recognised that while Gd P growth will recover from the temporary shock caused 
by the pandemic, human lives that are lost cannot be brought back. The response drew on 
epidemiological and economic research, especially those pertaining to the Spanish Flu, 
which highlighted that an early, intense lockdown provided a win-win strategy to save 
lives, and preserve livelihoods via economic recovery in the medium to long-term. The 
strategy was also motivated by the Nobel-Prize winning research in Hansen & Sargent 
(2001) that recommends a policy focused on minimising losses in a worst case scenario 
when uncertainty is very high. Faced with an unprecedented pandemic and the resultant 
uncertainty, loss of scores of human lives captured thus the worst-case scenario. 
This strategy was also tailored to india’ s unique vulnerabilities to the pandemic. First, as the 
pace of spread of a pandemic depends upon network effects, a huge population inherently 
enables a higher pace of spread. Second, as the pandemic spreads via human contact, high 
population density, especially at the bottom of the pyramid, innately aids the spread of the 
pandemic at its onset. Third, although the average age is low, india’s vulnerable elderly 
population, in absolute numbers, exceeds significantly that of other countries. Finally, an 
overburdened health infrastructure exposed the country to a humongous supply-demand 
mismatch that could have severely exacerbated fatalities. in fact, assessments of crores 
of cases and several thousands of deaths by several international institutes in March and 
April possibly reflected the concerns stemming from such vulnerabilities.
To implement its strategy, india imposed the most stringent lockdown at the very onset of 
the pandemic. This enabled flattening of the pandemic curve and, thereby, provided the 
necessary time to ramp up the health and testing infrastructure. Faced with enormous 
????  ?? ????? ? ?? ?????? ?? ?????
???? ?
2 Economic Survey 2020-21   V olume 1
uncertainty, india adopted a strategy of Bayesian updating to continually calibrate its 
response while gradually unlocking and easing economic activity. 
Using a plethora of evidence, the Survey demonstrates the benefits of this strategy in this 
chapter . india has transformed the short-term trade-off between lives and livelihoods into a 
win-win in the medium to long-term that saves both lives and livelihoods. By estimating the 
natural number of cases and deaths expected across countries based on their population, 
population density, demographics, tests conducted, and the health infrastructure, we 
compare these estimates with actual numbers to show that india restricted the Covid -19 
spread by 37 lakh cases and saved more than 1 lakh lives. Uttar Pradesh, Gujarat and Bihar 
have restricted the case spread the best; Kerala, T elangana and Andhra Pradesh have saved 
the most lives; Maharashtra has under-performed the most in restricting the spread of cases 
and in saving lives. The analysis clearly shows that early and more stringent lockdowns 
have been effective in controlling the spread of the pandemic – both across countries and 
across States in india.
By constructing a stringency index at the State level Survey show that the under-or-over 
performance in cases and deaths (compared to the expected) correlates strongly with the 
stringency of the lockdown. Similarly, the v- shaped economic recovery also strongly 
correlates with the stringency of the lockdown. This alleviates concerns that the inference 
about the impact of the lockdown is due to any cofounding factors peculiar to india such 
as higher level of immunity, BCG vaccination, etc. As such India-specific factors are 
common to all states, they cannot be accounting for this correlation. Thus, Survey infer 
that the lockdown had a causal impact on saving lives and the economic recovery.  india 
thus benefited from successfully pushing the peak of the pandemic curve to September, 
2020 through the lockdown. After this peak, india has been unique in experiencing 
declining daily cases despite increasing mobility. 
While there was a 23.9 per cent contraction in GdP in Q1, the recovery has been a 
v-shaped one as seen in the 7.5 per cent decline in Q2 and the recovery across all key 
economic indicators. in line with learning from economic research, economic activity in 
States with higher intial stringency has rebounded faster during the year. o n the economic 
policy front, india recognized that, unlike previous crises, the Covid pandemic affects both 
demand and supply. Furthermore, given disruptions in the labour markets that can affect 
disposable income and firms suffering financial distress, the loss of productive capacity 
due to hysteresis could not be ruled out. Therefore, a slew of structural reforms were 
announced; together, these would help to expand supply significantly in the medium to long 
term. o n the demand side, at the onset of the pandemic, india’ s policies focused purely on 
necessities. This was optimal given the uncertainty and the resultant precautionary motives 
to save as well as the economic restrictions during the lockdown. After all, pushing down 
on the accelerator while the brakes are clamped only wastes fuel. d uring the unlock phase, 
demand-side measures have been announced in a calibrated manner. A public investment 
programme centred around the National infrastructure Pipeline is likely to accelerate this 
demand push and further the recovery. The upturn in the economy while avoiding a second 
wave of infections makes india a sui generis case in strategic policymaking amidst a once-
in-a-century pandemic.
 
Page 3


CHAPTER
01
Saving Lives and Livelihoods  
Amidst a Once-in-a-Century Crisis
Saving a life that is in jeopardy is the origin of dharma 
– Mahabharata (Shanti parva), Chapter 13, Shloka 598
The Covid-19 pandemic engendered a once-in-a-century global crisis in 2020 – a unique 
recession where 90 per cent of countries are expected to experience a contraction in Gd P 
per capita. Faced with unprecedented uncertainty at the onset of the pandemic, india 
focused on saving lives and livelihoods by its willingness to take short-term pain for long-
term gain. india’s response stemmed from the humane principle advocated eloquently in 
the Mahabharata that “Saving a life that is in jeopardy is the origin of dharma.” Therefore, 
india recognised that while Gd P growth will recover from the temporary shock caused 
by the pandemic, human lives that are lost cannot be brought back. The response drew on 
epidemiological and economic research, especially those pertaining to the Spanish Flu, 
which highlighted that an early, intense lockdown provided a win-win strategy to save 
lives, and preserve livelihoods via economic recovery in the medium to long-term. The 
strategy was also motivated by the Nobel-Prize winning research in Hansen & Sargent 
(2001) that recommends a policy focused on minimising losses in a worst case scenario 
when uncertainty is very high. Faced with an unprecedented pandemic and the resultant 
uncertainty, loss of scores of human lives captured thus the worst-case scenario. 
This strategy was also tailored to india’ s unique vulnerabilities to the pandemic. First, as the 
pace of spread of a pandemic depends upon network effects, a huge population inherently 
enables a higher pace of spread. Second, as the pandemic spreads via human contact, high 
population density, especially at the bottom of the pyramid, innately aids the spread of the 
pandemic at its onset. Third, although the average age is low, india’s vulnerable elderly 
population, in absolute numbers, exceeds significantly that of other countries. Finally, an 
overburdened health infrastructure exposed the country to a humongous supply-demand 
mismatch that could have severely exacerbated fatalities. in fact, assessments of crores 
of cases and several thousands of deaths by several international institutes in March and 
April possibly reflected the concerns stemming from such vulnerabilities.
To implement its strategy, india imposed the most stringent lockdown at the very onset of 
the pandemic. This enabled flattening of the pandemic curve and, thereby, provided the 
necessary time to ramp up the health and testing infrastructure. Faced with enormous 
????  ?? ????? ? ?? ?????? ?? ?????
???? ?
2 Economic Survey 2020-21   V olume 1
uncertainty, india adopted a strategy of Bayesian updating to continually calibrate its 
response while gradually unlocking and easing economic activity. 
Using a plethora of evidence, the Survey demonstrates the benefits of this strategy in this 
chapter . india has transformed the short-term trade-off between lives and livelihoods into a 
win-win in the medium to long-term that saves both lives and livelihoods. By estimating the 
natural number of cases and deaths expected across countries based on their population, 
population density, demographics, tests conducted, and the health infrastructure, we 
compare these estimates with actual numbers to show that india restricted the Covid -19 
spread by 37 lakh cases and saved more than 1 lakh lives. Uttar Pradesh, Gujarat and Bihar 
have restricted the case spread the best; Kerala, T elangana and Andhra Pradesh have saved 
the most lives; Maharashtra has under-performed the most in restricting the spread of cases 
and in saving lives. The analysis clearly shows that early and more stringent lockdowns 
have been effective in controlling the spread of the pandemic – both across countries and 
across States in india.
By constructing a stringency index at the State level Survey show that the under-or-over 
performance in cases and deaths (compared to the expected) correlates strongly with the 
stringency of the lockdown. Similarly, the v- shaped economic recovery also strongly 
correlates with the stringency of the lockdown. This alleviates concerns that the inference 
about the impact of the lockdown is due to any cofounding factors peculiar to india such 
as higher level of immunity, BCG vaccination, etc. As such India-specific factors are 
common to all states, they cannot be accounting for this correlation. Thus, Survey infer 
that the lockdown had a causal impact on saving lives and the economic recovery.  india 
thus benefited from successfully pushing the peak of the pandemic curve to September, 
2020 through the lockdown. After this peak, india has been unique in experiencing 
declining daily cases despite increasing mobility. 
While there was a 23.9 per cent contraction in GdP in Q1, the recovery has been a 
v-shaped one as seen in the 7.5 per cent decline in Q2 and the recovery across all key 
economic indicators. in line with learning from economic research, economic activity in 
States with higher intial stringency has rebounded faster during the year. o n the economic 
policy front, india recognized that, unlike previous crises, the Covid pandemic affects both 
demand and supply. Furthermore, given disruptions in the labour markets that can affect 
disposable income and firms suffering financial distress, the loss of productive capacity 
due to hysteresis could not be ruled out. Therefore, a slew of structural reforms were 
announced; together, these would help to expand supply significantly in the medium to long 
term. o n the demand side, at the onset of the pandemic, india’ s policies focused purely on 
necessities. This was optimal given the uncertainty and the resultant precautionary motives 
to save as well as the economic restrictions during the lockdown. After all, pushing down 
on the accelerator while the brakes are clamped only wastes fuel. d uring the unlock phase, 
demand-side measures have been announced in a calibrated manner. A public investment 
programme centred around the National infrastructure Pipeline is likely to accelerate this 
demand push and further the recovery. The upturn in the economy while avoiding a second 
wave of infections makes india a sui generis case in strategic policymaking amidst a once-
in-a-century pandemic.
 
3 Saving Lives and Livelihoods Amidst a Once-in-a-Century Crisis
COVID-19: ONCE IN A CENTURY ‘CRISIS’
1.1 The world has endured a year of the unexpected onslaught by the novel COVID-19 virus - 
SARS-CoV-2 - first identified in Wuhan city of China in December 2019. The virus has posed an 
unprecedented challenge for policy making, globally and nationally.  It has tested the mettle of 
policymakers to deal with uncertain, fluid, complex and dynamic situations having far-reaching 
socio-economic implications. It has also tested the frontiers of medical science, which rose to 
the challenge by developing an effective vaccine within a year.
1.2 The pattern and trends in spread of the virus across major countries showed that confirmed 
cases spread exponentially once community transmission began. Understanding the disease 
dynamics posed challenges as a large fraction of affected people were asymptomatic but were 
potentially contributing to the spread of the pandemic. By the end of February 2020, the infection 
had spread to over 54 countries, infected more than 85,403 individuals across the world and 
resulted in around 3,000 deaths. The exponential rise in the number of cases being witnessed daily 
compelled the World Health Organization (WHO) to title this outbreak a pandemic on March 11, 
2020 – within a period of three months of its emergence. Within a year, it has infected around 9.6 
crore people growing at an average rate of 3.3 per cent per day. The number of daily cases is still 
rising with more than 6 lakh cases per day. The pandemic has accounted for 20.5 lakh death across 
220 countries with a global case fatality rate of 2.2 per cent as of 15
th
 January 2020. However, in 
the initial stages of the pandemic, the world average case fatality rate (CFR) was much higher at 
5-6 per cent (Figure 1). These features have made the virus lethal.
Figure 1: Global Trend in COVID-19 Spread and Case Fatality Rates
Source: Data accessed from World Health Organisation (WHO)– as on 31
st
 December, 2020
1.3 The only strategy that seemed viable for containment of the pandemic was active surveillance, 
early detection, isolation and case management, contact tracing and prevention of onward spread 
by practicing social distancing and safety precautions. V arious non-pharmaceutical interventions 
(NPIs) – such as lockdowns, closure of schools and non-essential business, travel restrictions – were, 
therefore, adopted by countries across the globe. These were aimed to slow down the transmission of 
infection or ‘flatten the epidemic curve’ and buy the health care system some time to handle the surge 
in demand for its services and for development of an effective treatment and a vaccine (Box 1).
1.4 The global health crisis prompted by COVID-19, in addition to an enormous human toll, 
has engendered the largest economic shock the world economy has witnessed in the last century. 
The pandemic and associated lockdown measures led to a de facto shutdown of a significant 
Page 4


CHAPTER
01
Saving Lives and Livelihoods  
Amidst a Once-in-a-Century Crisis
Saving a life that is in jeopardy is the origin of dharma 
– Mahabharata (Shanti parva), Chapter 13, Shloka 598
The Covid-19 pandemic engendered a once-in-a-century global crisis in 2020 – a unique 
recession where 90 per cent of countries are expected to experience a contraction in Gd P 
per capita. Faced with unprecedented uncertainty at the onset of the pandemic, india 
focused on saving lives and livelihoods by its willingness to take short-term pain for long-
term gain. india’s response stemmed from the humane principle advocated eloquently in 
the Mahabharata that “Saving a life that is in jeopardy is the origin of dharma.” Therefore, 
india recognised that while Gd P growth will recover from the temporary shock caused 
by the pandemic, human lives that are lost cannot be brought back. The response drew on 
epidemiological and economic research, especially those pertaining to the Spanish Flu, 
which highlighted that an early, intense lockdown provided a win-win strategy to save 
lives, and preserve livelihoods via economic recovery in the medium to long-term. The 
strategy was also motivated by the Nobel-Prize winning research in Hansen & Sargent 
(2001) that recommends a policy focused on minimising losses in a worst case scenario 
when uncertainty is very high. Faced with an unprecedented pandemic and the resultant 
uncertainty, loss of scores of human lives captured thus the worst-case scenario. 
This strategy was also tailored to india’ s unique vulnerabilities to the pandemic. First, as the 
pace of spread of a pandemic depends upon network effects, a huge population inherently 
enables a higher pace of spread. Second, as the pandemic spreads via human contact, high 
population density, especially at the bottom of the pyramid, innately aids the spread of the 
pandemic at its onset. Third, although the average age is low, india’s vulnerable elderly 
population, in absolute numbers, exceeds significantly that of other countries. Finally, an 
overburdened health infrastructure exposed the country to a humongous supply-demand 
mismatch that could have severely exacerbated fatalities. in fact, assessments of crores 
of cases and several thousands of deaths by several international institutes in March and 
April possibly reflected the concerns stemming from such vulnerabilities.
To implement its strategy, india imposed the most stringent lockdown at the very onset of 
the pandemic. This enabled flattening of the pandemic curve and, thereby, provided the 
necessary time to ramp up the health and testing infrastructure. Faced with enormous 
????  ?? ????? ? ?? ?????? ?? ?????
???? ?
2 Economic Survey 2020-21   V olume 1
uncertainty, india adopted a strategy of Bayesian updating to continually calibrate its 
response while gradually unlocking and easing economic activity. 
Using a plethora of evidence, the Survey demonstrates the benefits of this strategy in this 
chapter . india has transformed the short-term trade-off between lives and livelihoods into a 
win-win in the medium to long-term that saves both lives and livelihoods. By estimating the 
natural number of cases and deaths expected across countries based on their population, 
population density, demographics, tests conducted, and the health infrastructure, we 
compare these estimates with actual numbers to show that india restricted the Covid -19 
spread by 37 lakh cases and saved more than 1 lakh lives. Uttar Pradesh, Gujarat and Bihar 
have restricted the case spread the best; Kerala, T elangana and Andhra Pradesh have saved 
the most lives; Maharashtra has under-performed the most in restricting the spread of cases 
and in saving lives. The analysis clearly shows that early and more stringent lockdowns 
have been effective in controlling the spread of the pandemic – both across countries and 
across States in india.
By constructing a stringency index at the State level Survey show that the under-or-over 
performance in cases and deaths (compared to the expected) correlates strongly with the 
stringency of the lockdown. Similarly, the v- shaped economic recovery also strongly 
correlates with the stringency of the lockdown. This alleviates concerns that the inference 
about the impact of the lockdown is due to any cofounding factors peculiar to india such 
as higher level of immunity, BCG vaccination, etc. As such India-specific factors are 
common to all states, they cannot be accounting for this correlation. Thus, Survey infer 
that the lockdown had a causal impact on saving lives and the economic recovery.  india 
thus benefited from successfully pushing the peak of the pandemic curve to September, 
2020 through the lockdown. After this peak, india has been unique in experiencing 
declining daily cases despite increasing mobility. 
While there was a 23.9 per cent contraction in GdP in Q1, the recovery has been a 
v-shaped one as seen in the 7.5 per cent decline in Q2 and the recovery across all key 
economic indicators. in line with learning from economic research, economic activity in 
States with higher intial stringency has rebounded faster during the year. o n the economic 
policy front, india recognized that, unlike previous crises, the Covid pandemic affects both 
demand and supply. Furthermore, given disruptions in the labour markets that can affect 
disposable income and firms suffering financial distress, the loss of productive capacity 
due to hysteresis could not be ruled out. Therefore, a slew of structural reforms were 
announced; together, these would help to expand supply significantly in the medium to long 
term. o n the demand side, at the onset of the pandemic, india’ s policies focused purely on 
necessities. This was optimal given the uncertainty and the resultant precautionary motives 
to save as well as the economic restrictions during the lockdown. After all, pushing down 
on the accelerator while the brakes are clamped only wastes fuel. d uring the unlock phase, 
demand-side measures have been announced in a calibrated manner. A public investment 
programme centred around the National infrastructure Pipeline is likely to accelerate this 
demand push and further the recovery. The upturn in the economy while avoiding a second 
wave of infections makes india a sui generis case in strategic policymaking amidst a once-
in-a-century pandemic.
 
3 Saving Lives and Livelihoods Amidst a Once-in-a-Century Crisis
COVID-19: ONCE IN A CENTURY ‘CRISIS’
1.1 The world has endured a year of the unexpected onslaught by the novel COVID-19 virus - 
SARS-CoV-2 - first identified in Wuhan city of China in December 2019. The virus has posed an 
unprecedented challenge for policy making, globally and nationally.  It has tested the mettle of 
policymakers to deal with uncertain, fluid, complex and dynamic situations having far-reaching 
socio-economic implications. It has also tested the frontiers of medical science, which rose to 
the challenge by developing an effective vaccine within a year.
1.2 The pattern and trends in spread of the virus across major countries showed that confirmed 
cases spread exponentially once community transmission began. Understanding the disease 
dynamics posed challenges as a large fraction of affected people were asymptomatic but were 
potentially contributing to the spread of the pandemic. By the end of February 2020, the infection 
had spread to over 54 countries, infected more than 85,403 individuals across the world and 
resulted in around 3,000 deaths. The exponential rise in the number of cases being witnessed daily 
compelled the World Health Organization (WHO) to title this outbreak a pandemic on March 11, 
2020 – within a period of three months of its emergence. Within a year, it has infected around 9.6 
crore people growing at an average rate of 3.3 per cent per day. The number of daily cases is still 
rising with more than 6 lakh cases per day. The pandemic has accounted for 20.5 lakh death across 
220 countries with a global case fatality rate of 2.2 per cent as of 15
th
 January 2020. However, in 
the initial stages of the pandemic, the world average case fatality rate (CFR) was much higher at 
5-6 per cent (Figure 1). These features have made the virus lethal.
Figure 1: Global Trend in COVID-19 Spread and Case Fatality Rates
Source: Data accessed from World Health Organisation (WHO)– as on 31
st
 December, 2020
1.3 The only strategy that seemed viable for containment of the pandemic was active surveillance, 
early detection, isolation and case management, contact tracing and prevention of onward spread 
by practicing social distancing and safety precautions. V arious non-pharmaceutical interventions 
(NPIs) – such as lockdowns, closure of schools and non-essential business, travel restrictions – were, 
therefore, adopted by countries across the globe. These were aimed to slow down the transmission of 
infection or ‘flatten the epidemic curve’ and buy the health care system some time to handle the surge 
in demand for its services and for development of an effective treatment and a vaccine (Box 1).
1.4 The global health crisis prompted by COVID-19, in addition to an enormous human toll, 
has engendered the largest economic shock the world economy has witnessed in the last century. 
The pandemic and associated lockdown measures led to a de facto shutdown of a significant 
4 Economic Survey 2020-21   V olume 1
portion of the global economy, thereby triggering a global recession this year. The world economy 
is estimated to contract in 2020 by 4.3 per cent, as per World Bank, and 3.5 per cent, as per IMF. 
The crisis World is facing today is unique in a number of ways. Firstly, the health crisis-induced 
global recession is in contrast with previous global recessions which were driven by confluences 
of a wide range of factors, including financial crises (the Great Depression in 1930-32; 1982; 
1991; 2009), sharp movements in oil prices (1975; 1982), and wars (1914; 1917-21; 1945-46). 
1.5 Secondly, this recession is highly synchronized as the fraction of economies experiencing 
annual declines in national per capita is highest since 1870—more than 90 per cent, even higher 
than the proportion of about 85 per cent of countries in recession at the height of the Great 
Depression of 1930-32 (Figure 2). The pandemic is, therefore, once in a 150-year event with an 
unprecedented impact with all regions in the world projected to experience negative growth in 
2020. It is aptly called the ‘Great Lockdown’.
Figure 2: Once-in-a-Century ‘Synchronized’ Recession
Source: World Bank
Note: Recession is defined here as contraction in per capita income
1.6 Thirdly, the present crisis is unique as it originated in a pandemic that required social 
distancing and limiting of physical interactions. Thus, inherent to the crisis there was the trade-
off – at least in the short run – between health and human lives, on the one hand, and the economy 
and livelihoods, on the other hand. Specifically, containment measures, necessary to manage the 
pandemic and save lives, limited human interactions and thereby restricted economic activities 
of various hues and exacerbated the impact on livelihoods. Thus, the COVID crisis presented a 
trade-off between lives and livelihoods, in the short run. 
1.7 The short-run trade-off presented countries with policy options that revealed 
policymakers’ preferences for the “value” placed on human life versus the “price” of 
temporary economic restrictions. Unlike Oscar Wilde’s cynic, “who knows the price of 
everything and the value of nothing,” India’s policy response to the pandemic stemmed 
fundamentally from the humane principle advocated eloquently in the Mahabharata that 
“Saving a life that is in jeopardy is the origin of dharma.” Therefore, the “price” paid 
for temporary economic restrictions in the form of temporary GDP decline is dwarfed by 
the “value” placed on human life. As the Survey demonstrates clearly, using a plethora 
Page 5


CHAPTER
01
Saving Lives and Livelihoods  
Amidst a Once-in-a-Century Crisis
Saving a life that is in jeopardy is the origin of dharma 
– Mahabharata (Shanti parva), Chapter 13, Shloka 598
The Covid-19 pandemic engendered a once-in-a-century global crisis in 2020 – a unique 
recession where 90 per cent of countries are expected to experience a contraction in Gd P 
per capita. Faced with unprecedented uncertainty at the onset of the pandemic, india 
focused on saving lives and livelihoods by its willingness to take short-term pain for long-
term gain. india’s response stemmed from the humane principle advocated eloquently in 
the Mahabharata that “Saving a life that is in jeopardy is the origin of dharma.” Therefore, 
india recognised that while Gd P growth will recover from the temporary shock caused 
by the pandemic, human lives that are lost cannot be brought back. The response drew on 
epidemiological and economic research, especially those pertaining to the Spanish Flu, 
which highlighted that an early, intense lockdown provided a win-win strategy to save 
lives, and preserve livelihoods via economic recovery in the medium to long-term. The 
strategy was also motivated by the Nobel-Prize winning research in Hansen & Sargent 
(2001) that recommends a policy focused on minimising losses in a worst case scenario 
when uncertainty is very high. Faced with an unprecedented pandemic and the resultant 
uncertainty, loss of scores of human lives captured thus the worst-case scenario. 
This strategy was also tailored to india’ s unique vulnerabilities to the pandemic. First, as the 
pace of spread of a pandemic depends upon network effects, a huge population inherently 
enables a higher pace of spread. Second, as the pandemic spreads via human contact, high 
population density, especially at the bottom of the pyramid, innately aids the spread of the 
pandemic at its onset. Third, although the average age is low, india’s vulnerable elderly 
population, in absolute numbers, exceeds significantly that of other countries. Finally, an 
overburdened health infrastructure exposed the country to a humongous supply-demand 
mismatch that could have severely exacerbated fatalities. in fact, assessments of crores 
of cases and several thousands of deaths by several international institutes in March and 
April possibly reflected the concerns stemming from such vulnerabilities.
To implement its strategy, india imposed the most stringent lockdown at the very onset of 
the pandemic. This enabled flattening of the pandemic curve and, thereby, provided the 
necessary time to ramp up the health and testing infrastructure. Faced with enormous 
????  ?? ????? ? ?? ?????? ?? ?????
???? ?
2 Economic Survey 2020-21   V olume 1
uncertainty, india adopted a strategy of Bayesian updating to continually calibrate its 
response while gradually unlocking and easing economic activity. 
Using a plethora of evidence, the Survey demonstrates the benefits of this strategy in this 
chapter . india has transformed the short-term trade-off between lives and livelihoods into a 
win-win in the medium to long-term that saves both lives and livelihoods. By estimating the 
natural number of cases and deaths expected across countries based on their population, 
population density, demographics, tests conducted, and the health infrastructure, we 
compare these estimates with actual numbers to show that india restricted the Covid -19 
spread by 37 lakh cases and saved more than 1 lakh lives. Uttar Pradesh, Gujarat and Bihar 
have restricted the case spread the best; Kerala, T elangana and Andhra Pradesh have saved 
the most lives; Maharashtra has under-performed the most in restricting the spread of cases 
and in saving lives. The analysis clearly shows that early and more stringent lockdowns 
have been effective in controlling the spread of the pandemic – both across countries and 
across States in india.
By constructing a stringency index at the State level Survey show that the under-or-over 
performance in cases and deaths (compared to the expected) correlates strongly with the 
stringency of the lockdown. Similarly, the v- shaped economic recovery also strongly 
correlates with the stringency of the lockdown. This alleviates concerns that the inference 
about the impact of the lockdown is due to any cofounding factors peculiar to india such 
as higher level of immunity, BCG vaccination, etc. As such India-specific factors are 
common to all states, they cannot be accounting for this correlation. Thus, Survey infer 
that the lockdown had a causal impact on saving lives and the economic recovery.  india 
thus benefited from successfully pushing the peak of the pandemic curve to September, 
2020 through the lockdown. After this peak, india has been unique in experiencing 
declining daily cases despite increasing mobility. 
While there was a 23.9 per cent contraction in GdP in Q1, the recovery has been a 
v-shaped one as seen in the 7.5 per cent decline in Q2 and the recovery across all key 
economic indicators. in line with learning from economic research, economic activity in 
States with higher intial stringency has rebounded faster during the year. o n the economic 
policy front, india recognized that, unlike previous crises, the Covid pandemic affects both 
demand and supply. Furthermore, given disruptions in the labour markets that can affect 
disposable income and firms suffering financial distress, the loss of productive capacity 
due to hysteresis could not be ruled out. Therefore, a slew of structural reforms were 
announced; together, these would help to expand supply significantly in the medium to long 
term. o n the demand side, at the onset of the pandemic, india’ s policies focused purely on 
necessities. This was optimal given the uncertainty and the resultant precautionary motives 
to save as well as the economic restrictions during the lockdown. After all, pushing down 
on the accelerator while the brakes are clamped only wastes fuel. d uring the unlock phase, 
demand-side measures have been announced in a calibrated manner. A public investment 
programme centred around the National infrastructure Pipeline is likely to accelerate this 
demand push and further the recovery. The upturn in the economy while avoiding a second 
wave of infections makes india a sui generis case in strategic policymaking amidst a once-
in-a-century pandemic.
 
3 Saving Lives and Livelihoods Amidst a Once-in-a-Century Crisis
COVID-19: ONCE IN A CENTURY ‘CRISIS’
1.1 The world has endured a year of the unexpected onslaught by the novel COVID-19 virus - 
SARS-CoV-2 - first identified in Wuhan city of China in December 2019. The virus has posed an 
unprecedented challenge for policy making, globally and nationally.  It has tested the mettle of 
policymakers to deal with uncertain, fluid, complex and dynamic situations having far-reaching 
socio-economic implications. It has also tested the frontiers of medical science, which rose to 
the challenge by developing an effective vaccine within a year.
1.2 The pattern and trends in spread of the virus across major countries showed that confirmed 
cases spread exponentially once community transmission began. Understanding the disease 
dynamics posed challenges as a large fraction of affected people were asymptomatic but were 
potentially contributing to the spread of the pandemic. By the end of February 2020, the infection 
had spread to over 54 countries, infected more than 85,403 individuals across the world and 
resulted in around 3,000 deaths. The exponential rise in the number of cases being witnessed daily 
compelled the World Health Organization (WHO) to title this outbreak a pandemic on March 11, 
2020 – within a period of three months of its emergence. Within a year, it has infected around 9.6 
crore people growing at an average rate of 3.3 per cent per day. The number of daily cases is still 
rising with more than 6 lakh cases per day. The pandemic has accounted for 20.5 lakh death across 
220 countries with a global case fatality rate of 2.2 per cent as of 15
th
 January 2020. However, in 
the initial stages of the pandemic, the world average case fatality rate (CFR) was much higher at 
5-6 per cent (Figure 1). These features have made the virus lethal.
Figure 1: Global Trend in COVID-19 Spread and Case Fatality Rates
Source: Data accessed from World Health Organisation (WHO)– as on 31
st
 December, 2020
1.3 The only strategy that seemed viable for containment of the pandemic was active surveillance, 
early detection, isolation and case management, contact tracing and prevention of onward spread 
by practicing social distancing and safety precautions. V arious non-pharmaceutical interventions 
(NPIs) – such as lockdowns, closure of schools and non-essential business, travel restrictions – were, 
therefore, adopted by countries across the globe. These were aimed to slow down the transmission of 
infection or ‘flatten the epidemic curve’ and buy the health care system some time to handle the surge 
in demand for its services and for development of an effective treatment and a vaccine (Box 1).
1.4 The global health crisis prompted by COVID-19, in addition to an enormous human toll, 
has engendered the largest economic shock the world economy has witnessed in the last century. 
The pandemic and associated lockdown measures led to a de facto shutdown of a significant 
4 Economic Survey 2020-21   V olume 1
portion of the global economy, thereby triggering a global recession this year. The world economy 
is estimated to contract in 2020 by 4.3 per cent, as per World Bank, and 3.5 per cent, as per IMF. 
The crisis World is facing today is unique in a number of ways. Firstly, the health crisis-induced 
global recession is in contrast with previous global recessions which were driven by confluences 
of a wide range of factors, including financial crises (the Great Depression in 1930-32; 1982; 
1991; 2009), sharp movements in oil prices (1975; 1982), and wars (1914; 1917-21; 1945-46). 
1.5 Secondly, this recession is highly synchronized as the fraction of economies experiencing 
annual declines in national per capita is highest since 1870—more than 90 per cent, even higher 
than the proportion of about 85 per cent of countries in recession at the height of the Great 
Depression of 1930-32 (Figure 2). The pandemic is, therefore, once in a 150-year event with an 
unprecedented impact with all regions in the world projected to experience negative growth in 
2020. It is aptly called the ‘Great Lockdown’.
Figure 2: Once-in-a-Century ‘Synchronized’ Recession
Source: World Bank
Note: Recession is defined here as contraction in per capita income
1.6 Thirdly, the present crisis is unique as it originated in a pandemic that required social 
distancing and limiting of physical interactions. Thus, inherent to the crisis there was the trade-
off – at least in the short run – between health and human lives, on the one hand, and the economy 
and livelihoods, on the other hand. Specifically, containment measures, necessary to manage the 
pandemic and save lives, limited human interactions and thereby restricted economic activities 
of various hues and exacerbated the impact on livelihoods. Thus, the COVID crisis presented a 
trade-off between lives and livelihoods, in the short run. 
1.7 The short-run trade-off presented countries with policy options that revealed 
policymakers’ preferences for the “value” placed on human life versus the “price” of 
temporary economic restrictions. Unlike Oscar Wilde’s cynic, “who knows the price of 
everything and the value of nothing,” India’s policy response to the pandemic stemmed 
fundamentally from the humane principle advocated eloquently in the Mahabharata that 
“Saving a life that is in jeopardy is the origin of dharma.” Therefore, the “price” paid 
for temporary economic restrictions in the form of temporary GDP decline is dwarfed by 
the “value” placed on human life. As the Survey demonstrates clearly, using a plethora 
5 Saving Lives and Livelihoods Amidst a Once-in-a-Century Crisis
of evidence, India’s policy response valuing human life, even while paying the price of 
temporary GDP decline, has initiated the process of transformation where the short-term 
trade-off between lives and livelihoods is converted into a win-win in the medium to long-
term that saves both lives and livelihoods.
Box 1: Flattening the Curve
Epidemiological research highlights that a key strategy to combat the spread of an epidemic is 
termed as “flattening the curve.” The curve refers to the projected number of people who will 
contract the disease in a given population. The shape of the curve varies according to the rapidity 
with which the infection spreads in the community. There is a “peak” of the disease, where the 
number of infected individuals reaches a maximum, followed by a decline. Policymakers care 
particularly about the time taken to reach this peak because this determines the time available to 
respond to early signs of a pandemic. The peak number of infected individuals is also important 
as it determines the scale of medical facilities required. Overloaded healthcare systems that are 
forced to operate beyond their capacity lead to higher case fatality rates. In the short run, the 
capacity of any country’s health system is finite (number of hospital beds, number of skilled 
health professionals, ventilators/Integrated Care Units among others). This puts an upper 
bound on the number of patients that can be properly treated, at any given point of time. If the 
spread of the pandemic exceeds the existing capacity of the health system, it may lead to higher 
mortality rates. The ‘flattening of the curve’ spreads the pandemic over time, enabling more 
people to receive proper health treatment – ultimately lowering the fatality rate.
Flattening the Curve
The transmission potential is often summarized by the expected number of new infections 
caused by a typical infected individual during the early phase of the outbreak, and is usually 
denoted by the basic reproduction number, R
0
. It is simply the expected number of new 
cases of the disease caused by a single individual. Three possibilities exist for the potential 
transmission or decline of a disease, depending on its R
0
 value: (i) If R
0
 < 1, each existing 
infection causes less than one new infection and the disease eventually peters out; (ii) If R
0
 
=1, each existing infection causes one new infection and will not lead to an outbreak or an 
epidemic and (iii) If R
0
 > 1, each existing infection causes more than one new infection and 
there may be an outbreak or epidemic. Occasionally, one person may transmit to tens or even 
hundreds of other cases - this phenomenon is called super-spreading.