Business Sentiments during India’s National Lockdown: Lessons for Second and Potential Third Wave

15 Pages Posted: 12 Sep 2020 Last revised: 23 Jun 2021

See all articles by Bornali Bhandari

Bornali Bhandari

National Council of Applied Economic Research (NCAER)

Samarth Gupta

National Council of Applied Economic Research

Ajaya K. Sahu

National Council of Applied Economic Research (NCAER)

K S Urs

National Council of Applied Economic Research (NCAER)

Date Written: June 28, 2020

Abstract

The implementation of COVID-19 lockdown in March 2020 in India provided a unique opportunity to capture real-time changes in business sentiments during episodes of unexpected and sudden disruptions. Using a logit-probability model to analyse data of this natural experiment showed that firms’ 6-months ahead sentiments for its financial condition worsened drastically during lockdown compared to firms surveyed immediately prior to the announcement. Further, smaller firms showed a relatively higher impact. We also find that firms perceive this as a relatively higher demand shock in terms of falling domestic sales post-lockdown whereas supply shocks are perceived to be on the downside. Lastly the mitigation strategy of firms involved reducing employment for unskilled workers and wages for skilled workers. This unique study gives insights not only about firms and their strategies but regarding appropriate policy choices during lockdown. The lessons are applicable for governments which imposed local lockdowns during the second wave and potential disruption for the expected third wave.

Keywords: business sentiments, expectations, COVID-19, lockdown, sales, employment, wages, meta-data, MSMEs

JEL Classification: E32, J21, J31

Suggested Citation

Bhandari, Bornali and Gupta, Samarth and Sahu, Ajaya K. and Urs, K S, Business Sentiments during India’s National Lockdown: Lessons for Second and Potential Third Wave (June 28, 2020). Available at SSRN: https://ssrn.com/abstract=3637558 or http://dx.doi.org/10.2139/ssrn.3637558

Bornali Bhandari

National Council of Applied Economic Research (NCAER) ( email )

Parisila Bhawan
11 - Indraprastha Estate
New Delhi, 110002
India

Samarth Gupta (Contact Author)

National Council of Applied Economic Research ( email )

Parisila Bhawan
11 - Indraprastha Estate
New Delhi, 110002
India

HOME PAGE: http://blogs.bu.edu/samarth/

Ajaya K. Sahu

National Council of Applied Economic Research (NCAER) ( email )

Parisila Bhawan
11 - Indraprastha Estate
New Delhi, 110002
India

K S Urs

National Council of Applied Economic Research (NCAER) ( email )

Parisila Bhawan
11 - Indraprastha Estate
New Delhi, 110002
India

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