To mitigate the spread of coronavirus in India, the central government imposed a nation-wide lockdown on March 25, 2020. The lockdown necessitated the suspension of all economic activities, except the ones classified as ‘essential’ from time to time, and the ones that can be carried out from home. As a result, all economic activities which require persons to travel or work outside home, such as manufacturing of non-essential goods and construction, have stopped since then. While this has resulted in a loss of income for many individuals and businesses, the ongoing 40-day lockdown is also going to severely impact the revenue of the central and state governments, primarily the tax revenue that they would have generated from all such economic activities. This note discusses the possible effect of the lockdown on the revenue of the central and state governments in 2020-21. At this stage, the effect of the pandemic and the lockdown are difficult to estimate. We do not know whether there will be partial restrictions when the current lockdown ends on 3rd May or the possibility of further action during the year. Therefore, this note can be used as a first estimate to compute the impact under various scenarios. For example, a reader who believes that the effect on GDP growth would be different than the IMF’s estimate used below can extrapolate the numbers to fit his assumptions.
