Explained: How India is responding to lockdown relaxations

An HSBC report finds that economic disruption has come down but the lack of fiscal relief and a sharp increase in Covid cases pose significant threats to economic revival

Metro work restarts at Bundgarden road in Pune, on May 5, 2020. (Express Photo: Arul Horizon)

The gradual relaxation of the nationwide lockdown starting May 4 seems to have been a step towards resumption of normal economic activity. A new report by HSBC Global Research finds that only “40% of the economy will continue to remain disrupted (versus 65% and 50% in the first two phases of the lockdown, respectively)” thanks to the relaxations which divided the country into three different zones — red, orange and green.

As Table 1 shows, HSBC estimates 60% of the economy could gradually get back to work now.

Source: Media reports, CEIC, HSBC. Click to enlarge

Over the course of the last month, as the economy stalled by design, the PMI plummeted and unemployment shot up to nearly 30% (see Charts 1 & 2).

Chart 1; Source: Markit, HSBC. Click to enlarge Explained: How India is responding to coronavirus lockdown relaxations

Chart 2; Source: SMIE, HSBC. Data as of May 3, 2020

The PMI or the Purchasing Manager’s Index is a useful tool to understand whether businesses are doing better or worse over the last month. PMI typically surveys data on variables like overall production, new orders, inventory levels, supplier deliveries, and employment. So if overall production or new orders fall dramatically in any month, the PMI shows the decline.

But, according to HSBC, as things stand, “April may well be the trough”. That’s because there are signs of a pick up in the economy towards late April and especially early May.

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For instance, driving activity and electricity consumption are up.

Chart 3; Source: Apple mobility trends, HSBC. Explained: How India is responding to coronavirus lockdown relaxations

Chart 4; Source: POSOCO, HSBC

And so are the deposits in Jan Dhan accounts, possibly a reflection of the first fiscal relief package reaching the poor.

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Chart 5; Source: CEIC, HSBC. Data as of April 29, 2020

However, there are two caveats. One, much like these trends, the doubling rate of COVID-19 cases also picked up pace in early-May. (Read our explainer on why Covid cases are likely to see a sharp rise in the coming days)

Chart 6; Source: CEIC, HSBC. Data as of May 5, 2020

Moreover, given the stress in the overall economy, it requires another round of fiscal boost. As the chart below shows, HSBC expects a fiscal relief package of the order of 5% of the GDP (India’s GDP was $2.8 trillion in 2019). Half of the additional 5% would have to come from a higher fiscal deficit of the central government. (Also read: Why the government’s Covid relief package should come sooner rather than later)

Chart 7; Source: HSBC estimates

Udit Misra

Udit Misra is Senior Associate Editor at The Indian Express. Misra has reported on the Indian economy and policy landscape for the past two decades. He holds a Master’s degree in Economics from the Delhi School of Economics and is a Chevening South Asia Journalism Fellow from the University of Westminster. Misra is known for explanatory journalism and is a trusted voice among readers not just for simplifying complex economic concepts but also making sense of economic news both in India and abroad. Professional Focus He writes three regular columns for the publication. ExplainSpeaking: A weekly explanatory column that answers the most important questions surrounding the economic and policy developments. GDP (Graphs, Data, Perspectives): Another weekly column that uses interesting charts and data to provide perspective on an issue dominating the news during the week. Book, Line & Thinker: A fortnightly column that for reviewing books, both new and old. Recent Notable Articles (Late 2025) His recent work focuses heavily on the weakening Indian Rupee, the global impact of U.S. economic policy under Donald Trump, and long-term domestic growth projections: Currency and Macroeconomics: "GDP: Anatomy of rupee weakness against the dollar" (Dec 19, 2025) — Investigating why the Rupee remains weak despite India's status as a fast-growing economy. "GDP: Amid the rupee's fall, how investors are shunning the Indian economy" (Dec 5, 2025). "Nobel Prize in Economic Sciences 2025: How the winners explained economic growth" (Oct 13, 2025). Global Geopolitics and Trade: "Has the US already lost to China? Trump's policies and the shifting global order" (Dec 8, 2025). "The Great Sanctions Hack: Why economic sanctions don't work the way we expect" (Nov 23, 2025) — Based on former RBI Governor Urjit Patel's new book. "ExplainSpeaking: How Trump's tariffs have run into an affordability crisis" (Nov 20, 2025). Domestic Policy and Data: "GDP: New labour codes and opportunity for India's weakest states" (Nov 28, 2025). "ExplainSpeaking | Piyush Goyal says India will be a $30 trillion economy in 25 years: Decoding the projections" (Oct 30, 2025) — A critical look at the feasibility of high-growth targets. "GDP: Examining latest GST collections, and where different states stand" (Nov 7, 2025). International Economic Comparisons: "GDP: What ails Germany, world's third-largest economy, and how it could grow" (Nov 14, 2025). "On the loss of Europe's competitive edge" (Oct 17, 2025). Signature Style Udit Misra is known his calm, data-driven, explanation-first economics journalism. He avoids ideological posturing, and writes with the aim of raising the standard of public discourse by providing readers with clarity and understanding of the ground realities. You can follow him on X (formerly Twitter) at @ieuditmisra ... Read More