This could better be understood with the impact of COVID-19 led lockdown on downside risk of Indian economy. Downside risk is the financial risk which tells us about the risk or uncertainty of the actual return being below the expected return.
We all are well aware about the severe disruption of both industrial production and consumer spending due to protracted lockdown nationwide (April – June). Citing Purchasing Manager’s Index (PMI) data of April, indicates dropping of Composite Output Index to 7.2 in the month which in itself is lowest as well as extreme in the 14.5 year of survey history, reflecting a collapse of business activity.
Though India after three months of long duration of lockdown has eased lockdown measures, new cases of COVID are surging resulted in India to be third most affected country in the world. If the infection rate will keep on escalating like this, only containment measures left to this populated as well as weak in healthcare system country is to call for lockdown again (as already some of the states like Bihar, Uttar Pradesh, West Bengal have announced full lockdown). This will further intensify the downside risk and so uncertainty about the recovery of Indian economy.
Department of Economic Studies and Policy
Central University of South Bihar