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Greenbacks or Grains: Comparing U.S. and India’s Covid-19 fiscal responses.

by Sukeerthi Vijayaraghavan

During the pandemic, western economies dealt mostly by handing out monetary assistance to support citizens. The view of experts was that India should take notes from the US and hand out money as a form of relief. However, the Indian government did not cave into these pressures. Instead, it chose to prioritize relief for those who needed it the most by providing in-kind relief packages to ensure food security. It also provided support through subsidised or interest-free loans to overcome the temporary liquidity issues of state governments and for capital formation. This article aims to compare the western model of fiscal support, specifically taking the case study of the U.S, with India’s response to the Covid-19 pandemic.


Economically speaking, it seems as though the US has not caught a break. First, an economic collapse due to the unprecedented Covid-19 pandemic, the effects of the Russo-Ukrainian war and then a 40-year high inflation rate that’s yet to be tamed. However, there is a country that has fared relatively well in comparison. India has managed to keep itself afloat post the Covid-19 pandemic as well as during the Russo-Ukrainian war. Despite experiencing similar setbacks, both countries have faced different outcomes post the pandemic. To understand why that is the case, one needs to go back and understand the measures the respective governments took to curb the pandemic.

Western economies and relief policies

The Covid-19 pandemic was the first domino in the deck to send the US economy into a seemingly never-ending spiral. Many businesses laid off employees or shut down. Hence, the goal of the Federal Reserve (Fed) at the time was to increase employment and protect the livelihood of individuals. The following table shows the fiscal stimulus packages used by the government:

Table 1. Summary of US Fiscal Measures in Response to the COVID-19 Pandemic since January 2020

Country: USForegone revenuesAccelerated Spending/   Deferred revenuesLiquidity Support
HealthNon-HealthSub TotalEquity, loans, asset purchaseContingent LiabilitiesSub Total
GuaranteesQuasi Fiscal
% of GDP3.30%22.2%25.50%0.10%0.30%2.20%2.5%

Values in USD bn


The fiscal stimulus package has been split into foregone revenues, accelerated spending and liquidity support. The focus of the analysis will be the spending on non-health purposes (mainly to support livelihood) under the foregone revenue category.

The total amount spent in US dollars on non-health purposes is $4,641 bn which is about 22.2% of the US’ GDP.

Summary of spend under non-health (foregone revenue category)

CountryPackageLC bnUSD bnType
US Non Health fiscal supportCoronavirus preparedness and response supplemental appropriation1.2Direct Cash
Family First Coronavirus Response Act39Direct Cash
Unemployment insurance437
Emergency appropriations350Direct Cash
Small business loan waiver349Direct Cash
Miscellaneous Emergency spend376Direct Cash
Paycheck protection program – small business Administration’s loans62Direct Cash
Pay check protection program small business Assistance187Direct Cash
Extra unemployment benefits44Direct Cash
Consolidated Appropriation Act – Support for household329Direct Cash
Consolidated Appropriation Act – Support for businesses347Direct Cash
Consolidated Appropriation Act – Support for Education and childcare92Direct Cash
Consolidated Appropriation Act – Miscellaneous1.90Direct Cash
American Rescue Plan – Support to household794Direct Cash
American Rescue Plan – Support to businesses86Direct Cash
American Rescue Plan – Support to state ,local and triable  governments362Direct Cash
American Rescue Plan – Support for education171Direct Cash
American Rescue Plan – Support for Childcare, and transport, federal emergency management authority, international response39Direct Cash
American Rescue Plan – Miscellaneous193Direct Cash


When the rate of injection of money into an economy is higher than the growth of its economic output inflation begins to increase. The injection of large sums of money into the economy was the misstep that created the domino effect we see today in the form of a 40-year high, uncontrollable inflation rate.

India’s unconventional response.

The Covid-19 pandemic did not spare India either. However, while western economies chose to respond by putting money into the hands of individuals, in contrast, the Government of India chose to take an unconventional route to respond to the pandemic.The government prioritised livelihood concerns just like its western counterparts but instead of providing direct cash, India chose to provide in-kind support (food support through its public distribution system). Some direct cash transfer element was used, and it was targeted and efficiently delivered through Jan Dhan accounts.

Country:IndiaForegone revenuesAccelerated Spending/   Deferred revenuesLiquidity Support
HealthNon-HealthSub TotalEquity, loans,  asset purchaseContingent LiabilitiesSubtotal
GuaranteesQuasi Fiscal
% of GDP0.50%3.6%4.10%0.70%0.30%5.30%0.60%6.2%

Values in USD bn


Summary of spend under non-health (foregone revenue category)

CountryPackageLC bnUSD bnType
India Non-Health fiscal supportInsurance cover for health care workers, in kind support ( food )+wage support for poor households1,49020.10
Rural Employment guarantee Scheme4005.40Direct Cash
Food support to migrants350.47
Food ration extension82911.18
Cash payment for targeted consumption570.77Direct Cash
Interest free Loans to public sector employees400.54
Public Investment2503.37
Interest free loans to state governments1201.62
PLI Scheme ( to be spent over 5 years)1,46019.69
Fertilizer subsidies6508.77Direct Cash
Urban housing projects1802.43
Additional Capital expenditure and industrial infrastructure1021.38
Rural Employment1001.35Direct Cash

Employment support to formal sector
600.81Direct Cash
Miscellaneous support991.34Direct Cash
Free Food grains2603.51
Interest free loans to states for Capital expenditure1502.02
Sub Total6,37586.0


What differentiates the approaches of India and the US?

Non-Health supportDirect cash (USD Bn)% of GDP

India took the route of predominantly supporting livelihood through in-kind food security support and less of putting money into the pockets of individuals while the US spent a significant portion of its non-health fiscal support through direct cash methods.

The latest  inflation rate of India is 7.41% which is less compared to the growing inflation rate in the United States which is at 8.2%. The inflation rates can be explained by the amount of cash that was directly handed to individuals. The US had spent $3,842bn by providing direct cash to individuals. This was about 18% of their GDP. Whereas India spent only 0.7% in direct cash which is a minuscule amount of their GDP.

Furthermore, India’s target inflation rate is 4% with an “upper tolerance limit” of 6%. While the US and other western economies have an inflation target rate of 2%. When compared to their respective target rates and upper tolerance limits, India’s inflation seems to be relatively in control when compared to the US and other western economies.

The Ukraine war exacerbated the inflation situation as food and energy prices shot up. Unlike the US which is self-sufficient in its energy requirements, India imports most of its energy requirements. India mitigated the risk of energy inflation by increasing its oil imports from Russia at discounted prices.

The Government of India also focused on investing its money during the pandemic into building well rounded reforms and providing provisions that aid those who need it. A few examples of these reforms were as follows:

1. Labour reforms

2. Farm reforms

3. Production-Linked Incentive (PLI) scheme

4. Foreign direct investment reforms

When looking at the growth rate of both countries, India’s economy grew by 8.7% in FY2022, whereas the US economy grew by 2.6% in the 3rd quarter of 2022. According to the IMF for the year 2023, India’s GDP is set to grow by 6.8% compared to about 1% for the US.


Given the statistics of the inflation rate and economic growth of both countries post the pandemic it is evident that Western economies chose to respond by what would help mitigate the issue in the short run but failed to account for long-run implications of inflation. Whereas India chose to observe the situation and take an unconventional route. This is observed in their relatively controlled inflation and better economic growth rate amongst big economies.

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