Eight states most affected by the COVID-19 pandemic account for over 60 per cent of the GDP and the extended restrictions will slam the economy harder, a report said on Tuesday.

The eight states, which include Maharashtra, Gujarat and Tamil Nadu, among others also account for 58 per cent of the employment, domestic rating agency Crisil’s research wing said in the report.

The lockdown has been extended till May 31 by the Centre for the third time with a liberty to states to decide the grading of the zones. Many of the affected states like Maharashtra have decided to continue with the restrictions.

 

Hit in economic activity

Analysts are estimating a contraction of up to 5 per cent in GDP despite the government’s efforts of pumping stimulus.

With states continuing to see a rise in cases, the restrictions have been extended. This is bound to slam the overall economy harder, the report said.

It noted that the top eight states have been selected as per the districts affected as at the end of the third lockdown on Sunday.

At the all-India level, the virus spread and lockdowns, and restrictions have pummelled economic activity. While all states were near- uniformly hit during the first and second lockdown phases, the third and fourth would impact them differently, it said.

Maharashtra, Tamil Nadu and Gujarat, being most dependent on output from industry and services, are more vulnerable to output losses as they face restrictions, it said.

Andhra Pradesh, Rajasthan and Uttar Pradesh are fiscally more vulnerable due to relatively higher debt ratios and also have high dependence on revenue sources from petroleum, liquor and stamp duty, it added.

Output could be more affected in the eight most pandemic-hit states as they face restrictions, it said, adding that the share of gross state value added (GSVA) from these states is 64 per cent in agriculture, 63 per cent in industry and 53 per cent in services.

Those with higher dependence on agriculture like Andhra Pradesh, Rajasthan, UP and West Bengal could fare better as a normal monsoon is expected to support it, it added.

Among the relatively less-hit states, restrictions on economic activity could hurt Karnataka and Kerala, where share of industry and services is higher, while in others like MP, Punjab and Bihar, a higher share of agriculture could cushion the economy this year.

Published on May 19, 2020