Covid-19: States That Will See The Steepest Contraction
Covid-19’s impact across states will not only depend on extent of virus’ spread but also on composition of economy of each state.
The Covid-19 pandemic will have varying impact across states. This will depend not just on the extent of the virus' spread but also on the composition of the economy of each state.
Since agricultural activities were less impacted, the states having a higher share of agriculture are expected to have suffered less compared to those where the share is low, according to India Ratings & Research. Also, services such as banking and financial services, IT & IT-enabled services were less impacted.
As such, the states in which the share of these services is high are expected to have suffered less during the lockdown compared to those where share of these services is low, the rating agency said in a note on Monday.
Overall, the Indian economy is seen contracting by 5.3%, it said.
Worst And Least Hit States
The steepest contraction in gross state domestic product in the financial year ending March 2021 will be seen across Goa, Gujarat, Sikkim and Assam. Each of these states will see a double-digit contraction.
For Goa and Gujarat, a contraction of 14.3% and 12.4% is being forecast. Assam and Sikkim will see a contraction of more than 10% each.
In contrast, Andhra Pradesh is expected to see the smallest contraction of 1.4%, followed by Jharkhand (-1.6%), Madhya Pradesh (-2.3%) and Punjab (-3%).
Among the largest states by GSDP, Maharashtra is likely to see its economy contract 6.1%. Tamil Nadu, too, is likely to see a similar drop in GSDP. Gujarat, which makes up the top three states by GSDP, will see a steeper fall compared to the others.
Among other large states, Uttar Pradesh is likely to see a contraction of 7.2% and Bihar of 4%.
Impact On State Revenue
While the slowdown is likely to impact the revenue performance of all states, those whose share of ‘own tax revenue’ in total revenue is higher are likely to witness higher volatility.
The most vulnerable states are Maharashtra, Gujarat, Tamil Nadu, Kerala, Telangana and Haryana, India Ratings said. The share of ‘own tax revenue’ in total revenue of these states has been budgeted at 57%-64% in 2020-21 and their FY21 nominal GSDP is expected to deviate from the budged nominal GSDP in the range of 15%-24%, the rating agency said.