Some State Economies More Vulnerable To India’s Lockdown, Says Crisil
While all states were uniformly hit in the first two phases of the lockdown, the third and fourth will impact them differently.
The lockdown to contain the Covid-19 pandemic has pummelled economic activity across India and all states were almost uniformly hit during first and second phases. But, according to CRISIL Ltd., the third and fourth phases would impact them differently.
India announced the world’s most stringent stay-at-home restrictions on March 25, with Prime Minister Narendra Modi extending it first till May 3. All ‘non-essential’ activities throughout the country came to a standstill in this period.
In the third phase, till May 17, the government eased some curbs and graded affected regions as red, orange and green zones. Restrictions were further eased in Lockdown 4.0 that will end on May 31.
Under the third phase, eight states had a higher share of districts classified under the most-affected red zone than the national average—West Bengal, Maharashtra, Andhra Pradesh, Tamil Nadu, Gujarat, Uttar Pradesh, Rajasthan and Telangana, according to Crisil’s ‘States of Disarray’ report. These states account for nearly 60 percent of India’s gross domestic product and 58 percent of the workforce, it said.
According to Crisil, here’s how these states will be impacted:
- Maharashtra, Tamil Nadu and Gujarat, being most dependent on output from industry and services, are more vulnerable to output losses as they face restrictions.
- Andhra Pradesh, Rajasthan and Uttar Pradesh are fiscally more vulnerable due to relatively higher debt ratios.
- Andhra Pradesh, West Bengal and Tamil Nadu have a higher share of informal workforce, which is vulnerable to job losses.
“Output could be affected more in the eight most pandemic-hit states as they face restrictions,” Crisil said, but those with higher dependence on agriculture – Andhra Pradesh, Rajasthan, Uttar Pradesh and West Bengal – could fare better in a normal monsoon.
Among the states where the virus spread is relatively controlled, Karnataka and Kerala could take a larger economic hit as their share of industry and services is higher, Crisil said. “While in others like Madhya Pradesh, Punjab and Bihar, a higher share of agriculture could cushion the economy this year.”
Revenue sources like tax on petroleum, liquor and stamp duty have also dried up in the lockdown. Among the eight most pandemic-hit states, Gujarat and Rajasthan have a heavy dependence on petroleum tax, Uttar Pradesh and Telangana on excise from liquor, and Maharashtra and Uttar Pradesh earn the most from stamp duty, according to the report.
Crisil identified informal workforce as a key point of vulnerability for states. Among the states with the highest share of red zones, West Bengal, Andhra Pradesh and Tamil Nadu have a higher proportion of casual labour, the report said. Bihar, Kerala, Karnataka, and Odisha are the other states that employ casual labourers in large numbers.
A large proportion of regular salaried workforce in Andhra Pradesh, Rajasthan and Gujarat do not have a valid job contract, according to Crisil.
