The great lockdown, uncertainty and trade: asymmetric impact on imports.

Abstract

The world economy has recently navigated through the pandemic caused by the coronavirus. Almost all the affected countries have responded with stringency measures to control the pandemic. However, these restrictions appear to have critically impacted the global supply chain and cross-border movement of goods. In this regard, we attempt to investigate the impact of pandemic-related stringency measures on India's import demand. For this purpose, we use bilateral monthly import data of India with its major trading counterparts. Our findings suggest that stringency measures have a positive impact on imports, indicating that the economy relies more on imported items when its domestic production and supply chain are disrupted by the pandemic-related restrictions. Conversely, the import origin countries' restrictions have a negative impact on Indian imports, indicating that these restrictions have adversely affected the production and supply chain in origin countries, thereby reducing the overall flow of imports to India. We also find that economic policy uncertainty of home and product origin countries has a negative impact on Indian imports. Our results also confirm that the pandemic-related restrictions and different types of uncertainty have an asymmetric effect on imports.