Maharashtra lockdown impact: Rs 40,000 crore hit to dent national economic growth, says Care Ratings

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April 05, 2021 8:33 PM

Maharashtra's "radical" lockdown move will have an economic impact of Rs 40,000 crore, with the trade, hotels and transport sector to bear the biggest dent, Care Ratings said

Covid-19 night curfew in MaharashtraMaharashtra on Sunday announced night curfew (starting today) and weekend lockdown to check the spread of the second wave of Coronavirus infections.

Maharashtra’s “radical” lockdown move will have an economic impact of Rs 40,000 crore, with the trade, hotels and transport sector to bear the biggest dent, Care Ratings said on Monday. The rating agency said the loss of economic activity will have a 0.32 per cent impact on the gross value added (GVA) growth at the national level. It revised down its national GDP growth estimate to 10.7 – 10.9 per cent from the 11 – 11.2 per cent given a week ago.

Maharashtra has been contributing nearly 60 per cent to the daily COVID-19 infections nationally and had over 57,000 new cases on Sunday. To mitigate the situation, the state government enforced a lockdown which entails complete shutdown at nights and on weekends, and limited activity during weekdays. The measures are expected to last for a month.

“…with FY22 starting on a sombre note with the lockdown fully in place for Maharashtra and to a lesser extent in other states, overall production and consumption would be affected,” the agency said. The decline in output by around Rs 40,000 crore in case of Maharashtra would lead to a dip in GVA growth by 0.32 per cent at the overall domestic economy level, it said.

Out of the projected Rs 137.8 lakh crore of GVA at the country level projected for FY22, Maharashtra would account for around Rs 20.7 lakh crore, which will now decline by around 2 per cent due to the lockdown. It explained that the loss of income is based on the relative share of Maharashtra in the various sectors, and the one-month impact of lockdown/ restrictions on them.

From a sectoral perspective, it said trade, hotels and transport will bear a Rs 15,772 crore hit, followed by financial services, real estate and professional services which will see a loss of Rs 9,885 crore, and public administration at Rs 8,192 crore. Terming the measures adopted by Maharashtra as “radical”, it said the state is the largest in terms of GSDP and has a share of around 15 per cent in GVA, followed by Tamil Nadu, Gujarat, Uttar Pradesh and Karnataka.

The limited five-day week model would come in the way of growth of even the non-services sector. As movement of people has been curtailed to a large extent, overall consumer demand would also get impacted affecting certain segments in manufacturing, it said.
Lesser activity in most segments will affect power consumption, and hence the overall production of electricity as well, it said, adding even the pace of construction will slow down and new projects will not be taken up.

Restrictions on functioning of non-essential shops is likely to impact the discretionary retail segment, and the e-commerce platforms are expected to benefit to a limited extent, it said.

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