States’ GDSP to contract 1.4-14.3 per cent in FY21: Report

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Published: June 29, 2020 3:27 PM

"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 per cent-14.3 per cent,'' the report said.

GDSP, COVID-19, lockdown, IT-enabled services, share of SOTR, latest news on state GDSPThe states in which the share of these services is high are expected to have suffered less during the lockdown compared to the one where share of these services is low, the agency said.

The gross state domestic product (GSDP) of all states is likely to contract up to 14.3 per cent in the current financial year due to the impact of COVID-19-induced lockdown on economic activities, says a report. States such as Assam, Goa, Gujarat and Sikkim are likely to witness a double-digit contraction in FY2021, India Ratings and Research said in a report on Monday.

“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 per cent-14.3 per cent,” the report said.

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.

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 share of these services is low, the agency said. It said in FY2019, the proportion of agriculture in gross value added was 14.6 per cent for Haryana and 25 per cent for Punjab.

The proportion of industry and services was 31.1 per cent and 54.3 per cent respectively in Haryana and 25.2 per cent and 49.8 per cent 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 per cent, higher than 47.9 per cent 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 per cent-64 per cent in FY2021 and their FY2021 nominal GSDP is expected to deviate from the budged nominal GSDP in the range of 15 per cent-24 per cent, it said.

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