Home Uncategorized Kerala GDP to dip 5.1 pc in FY21; States to witness 1pc-14pc...

Kerala GDP to dip 5.1 pc in FY21; States to witness 1pc-14pc contraction

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Goa, Gujarat to be worst hit; Andhra to be least impacted

KOCHI: The gross state domestic product (GSDP) of all Indian states is expected to contract in the current fiscal, FY21, in the range of 1.4 per cent-14.3 per cent, with the biggest contraction to be witnessed in Goa at 14.3 per cent followed by Gujarat at 12.4 per cent, whereas the lowest dip will be in Andhra Pradesh (1.4 per cent) and Jharkhand (1.6 per cent).

According India Ratings and Research, Kerala will close the financial year 2020-21 with its gross domestic product (GDP) logging a contraction of 5.1 per cent.

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 March 25, 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 per cent for Haryana and 25 per cent for Punjab in FY19.  Similarly, 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.

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 per cent, higher than 47.9 per cent 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 per cent – 64 per cent in FY21 and their FY21 nominal GSDP is expected to deviate from the budged nominal GSDP in the range of 15per cent-24 per cent.

 

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