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COVID-19 impact | Here's how much FY21 GDP of states could contract

Despite the nationwide lockdown enforced on March 25, 2020, several economic activities defined as essentials remained operational.

June 29, 2020 / 05:26 PM IST

The COVID-19-induced lockdown could lead to gross state domestic product (GSDP) or GDP of states shrinking up to 14.3 percent in FY21, according to rating firm India Ratings and Research.

States like Assam, Goa, Gujarat and Sikkim could face double-digit contraction in FY21 GDP, the rating agency said in a report on June 29.

"We expect the gross state domestic product (GSDP) of all states in India to contract in FY21. The contraction will be in the range of 1.4 percent-14.3 percent,” IndRa said in the report.

The top five major states where the impact of lockdown was the most pronounced are Karnataka, Jharkhand, Tamil Nadu, Kerala and Odisha.

The five major states where the impact of lockdown was the least pronounced are Madhya Pradesh, Punjab, Bihar, Andhra Pradesh and Uttar Pradesh, the report said.


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Despite the nation-wide lockdown enforced on March 25, 2020, several economic activities defined as essentials remained operational.

The impact of the lockdown on sectors namely agriculture, industry and services was differently, it said.

"Since agricultural activities were less impacted, the states having a higher share of agriculture are expected to have suffered less compared to the one where the share of agriculture is low," the report said.

Some sub-sectors, especially in the services such as banking and financial services, IT and IT-enabled services, were less impacted, because they were able to readjust their operations remotely owing to the high penetration of digital platform in their business operations, the report said.

The states in which the share of these services is high are expected to have suffered less during the lockdown compared to the one where the share of these services is low, the agency said.

It said in FY2019, the proportion of agriculture in gross value added was 14.6 percent for Haryana and 25 percent for Punjab.

The proportion of industry and services was 31.1 percent and 54.3 percent respectively in Haryana and 25.2 percent and 49.8 percent in Punjab during the year.

"This means the overall growth performance of Haryana is more susceptible to the performance of the industrial and services sectors. Our estimate suggests that the proportion of Haryana economy that became dysfunctional during the lockdown is 64.3 percent, higher than 47.9 percent of Punjab," the rating agency said.

The report further said state's own tax revenue (SOTR) is a function of the nominal GSDP of the state.

Although the lockdown is going to adversely impact the revenue performance of all the states, the states that are likely to be impacted more in FY2021 are the states whose share of SOTR in the total revenue is higher and are also expected to witness a higher deviation in their nominal GSDP from the budgeted GSDP, the report said.

"The most vulnerable states in this respect are Maharashtra, Gujarat, Tamil Nadu, Kerala, Telangana and Haryana," it said.

The share of SOTR in the total revenue of these states has been budgeted in the range of 57 percent-64 percent in FY2021 and their FY2021 nominal GSDP is expected to deviate from the budged nominal GSDP in the range of 15 percent-24 percent, it said.
first published: Jun 29, 2020 04:34 pm
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