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States seem to be more optimistic about growth prospects despite the Indian economy expected to contract by 8 per cent in the current fiscal as a fallout of the Covid-19 led crisis.
An analysis of State Budgets for 2021-22 by BusinessLine reveals that a number of States expect their respective GSDPs to grow in the current fiscal, while some projected a contraction, though largely not as sharp as that estimated for the Indian economy as a whole.
Shrugging off the Covid-19 pandemic blues, States like Chhattisgarh, West Bengal, Gujarat and Tamil Nadu expect their economies to grow in the current fiscal. However, others like Delhi, Haryana, Rajasthan, Jharkhand and Karnataka estimate a contraction in GSDP for 2020-21.
Only Maharashtra, which has registered one of the largest Covid case-loads in the country, expects a sharper contraction, compared to the GDP contraction for the country as a whole.
Better position
Most economists believe that States are in a better position to assess the growth of their economies than the Centre although some of the projections are often inflated. But whether these projections are over optimistic or indicate that the contraction in the Indian economy has been over estimated is yet unclear.
A recent SBI Ecowrap report said that if we take States’ GSDP estimates as given (as States are more informative about their economic situations), then the all-India GDP contraction would be significantly lower than what the NSO has projected.
“If we go ahead and add the value of GDP estimated as per our simulation to the remaining States, for which we do not have the GSDP numbers, this takes up India’s FY21 GDP to ₹209.5 lakh crore, which means that India’s GDP will actually expand by an approximate 3 per cent in nominal terms in 2020-21, as against the postulated 3.8 per cent contraction projected by NSO,” the report said.
It has argued that 2020-21 actuals for certain States would not be this high and the next year Budget will show downward revision in FY21 GSDP estimates.
It is also possible that with the pandemic and lockdown impacting urban centres more than the countryside, States with a higher contribution from agriculture expect to do well.
“A lot of this is driven by the share of agriculture. States which have a high share of agriculture will show better growth performance and States which have a lower share of performance should show worse growth,” said Pronab Sen, former Chief Statistician of India.
Uncertain about FY22
Significantly, many States, though hoping for a recovery in 2021-22, remain cautious about growth forecasts.
A report by ICICI Securities shows that while the Union Budget 2021-22 expected the economy to grow 14.4 per cent in nominal terms in FY22, major States have pencilled in GSDP growth of 11 per cent in their budgets. States’ expectations of nominal GSDP growth in FY22 vary between -6 per cent and 25 per cent, it said.
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