The Price of the Lockdown – The Effects of Social Distancing on the Indian Economy and Business During the COVID-19 Pandemic

Abstract

The decision of an immediate lockdown in India had put economic, social and religious activities to a grinding halt. The paper examines the impact of lockdown and social distancing policies on economic activities in India using a multivariate econometric model of the data collected for the period of 1st January to 31st August 2020. While social distancing policies are captured in terms of restrictions on internal movement, domestic travel and international travel, its effect on economic and business activity is captured through stock prices, purchasing managers index and exchange rate. Confirmed COVID-19 cases and related deaths are also used as independent variables. The results reveal a significant negative impact of social distancing policies on the economic and business activity, stock market and exchange rate. Further, the economic stimulus provided by the government could not bring a positive influence on the stock market.

Keywords: Lockdown, Economy, Financial, COVID-19, Social Distancing, India

JEL Classification: E65, E62