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States' GSDP to contract 1%-14% in FY21; These states will be most impacted!

Goa, Gujarat, Assam and Sikkim to be Most Impacted


India Ratings and Research (Ind-Ra) expects the gross state domestic product (GSDP) of all states in India to contract in FY21. The contraction will be range in be in the range of 1.4%-14.3%. According to the agency's estimate, the states that will witness a double-digit contraction in GSDP growth in FY21 are Assam, Goa, Gujarat and Sikkim. Using the insight gained in terms of the proportion of the state economy that was dysfunctional during the lockdown, the agency has estimated the GSDP for various states.

Despite the nation-wide lockdown enforced on 25 March 2020, several economic activities defined as essentials remained operational, while the lockdown impacted different sectors namely agriculture, industry and services differently. 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. Also, 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 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.

For example, the proportion of agriculture in gross value added was 14.6% for Haryana and 25.0% for Punjab in FY19.  Similarly, the proportion of industry and services was 31.1% and 54.3% respectively in Haryana and 25.2% and 49.8% in Punjab. This means the overall growth performance of Haryana is more susceptible to the performance of the industrial and services sectors.  As a result, our estimate suggests that the proportion of Haryana economy that became dysfunctional during the lockdown is 64.3%, higher than 47.9% of Punjab. The top five major states where impact of lockdown was the most pronounced are Karnataka, Jharkhand, Tamil Nadu, Kerala and Odisha. Similarly, the five major states where impact of lockdown was the least pronounced are Madhya Pradesh, Punjab, Bihar, Andhra Pradesh and Uttar Pradesh.

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 FY21 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 most vulnerable states in this respect are Maharashtra, Gujarat, Tamil Nadu, Kerala, Telangana and Haryana. The share of SOTR in the total revenue of these states has been budgeted in the range of 57%-64% in FY21 and their FY21 nominal GSDP is expected to deviate from the budged nominal GSDP in the range of 15%-24%.    

State-wise Estimated GSDP Growth in FY21

Andhra Pradesh

-1.4

Arunachal Pradesh

-8.2

Assam

-10.7

Bihar

-4.0

Chhattisgarh

-5.8

Goa

-14.3

Gujarat

-12.4

Haryana

-6.9

Himachal Pradesh

-9.9

Jharkhand

-1.6

Karnataka

-6.4

Kerala

-5.1

Madhya Pradesh

-2.3

Maharashtra

-6.1

Manipur

-3.7

Meghalaya

-3.6

Mizoram

-5.7

Nagaland

-2.1

Odisha

-9.1

Punjab

-3.0

Rajasthan

-4.6

Sikkim

-10.9

Tamil Nadu

-6.1

Telangana

-3.2

Tripura

-6.6

Uttar Pradesh

-7.2

Uttarakhand

-9.9

West Bengal

-5.2

All India

-5.3

Source: Ind-Ra based on GSDP data from National Statistical Office

 

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