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

Author

Listed:
  • Barun Deb Pal

    (International Food Policy Research Institute)

  • Sanjib Pohit

    (National Council of Applied Economic Research)

  • Meenakshi Rajeev

    (Indian Institute of Technology Jammu
    Institute for Social and Economic Change)

Abstract

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.

Suggested Citation

  • Barun Deb Pal & Sanjib Pohit & Meenakshi Rajeev, 2024. "Unpacking India’s fiscal responses to COVID-19: a computable general equilibrium modelling analysis," Indian Economic Review, Springer, vol. 59(1), pages 201-231, June.
    • Handle: RePEc:spr:inecre:v:59:y:2024:i:1:d:10.1007_s41775-024-00222-2
    DOI: 10.1007/s41775-024-00222-2
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    References listed on IDEAS

    as
    1. Peter B. Dixon & Maureen T. Rimmer, 2021. "Coping with seasonality in a quarterly CGE model: COVID‐19 and U.S. agriculture," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 65(4), pages 802-821, October.
    2. Bandyopadhyay, Simanti & Kabiraj, Sujana & Majumder, Subrata, 2023. "Subnational governments and COVID management," Economic Modelling, Elsevier, vol. 124(C).
    3. Pradhan, Basanta K. & Ghosh, Joydeep, 2021. "COVID-19 and the Paris Agreement target: A CGE analysis of alternative economic recovery scenarios for India," Energy Economics, Elsevier, vol. 103(C).
    4. Cui, Qi & He, Ling & Liu, Yu & Zheng, Yanting & Wei, Wei & Yang, Bo & Zhou, Meifang, 2021. "The impacts of COVID-19 pandemic on China’s transport sectors based on the CGE model coupled with a decomposition analysis approach," Transport Policy, Elsevier, vol. 103(C), pages 103-115.
    5. Srivastava, S.K. & Sivaramane, N., 2020. "Income-induced effects of COVID-19 on the food consumption pattern of Indian households," Agricultural Economics Research Review, Agricultural Economics Research Association (India), vol. 33(Conferenc), December.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Fiscal Policy; Computable General Equilibrium (CGE) Model; Covid-19 Pandemic; Indian Economy; Sectoral Impacts; Private Final Consumption Expenditure;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models

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