Lockdown in Maharashtra to shave off 0.3 per cent growth: Care Ratings

The weekend lockdown and harsher restrictions in Maharashtra which will come into effect from Monday will lead to a decline in output by around ₹40,000 crore for the state, shaving off 0.32 per cent from the GVA (gross added value) growth at the overall domestic economy level, as per a report by Care Ratings.

The Maharashtra Government on Sunday decided to implement harsh restrictions including night curfew for containing the second wave of Covid-19 pandemic. The restrictions will be implemented from April 5 (from 8 pm) to April 30, a press statement issued by the Chief Minister’s office said.

As part of the new restrictions, private offices, restaurants, cinemas and crowded places will remain closed. The state administration has also decided to impose a two-day lockdown from Friday night to Monday morning. Agricultural work, public, and private transport will continue. The e-commerce services will continue regularly from 7 am to 8 pm, but the home delivery staff will have to be vaccinated.

All shops, malls, market will be closed till April 30, except for groceries, medicines, vegetables and other essentials.

Private offices will be required to work entirely from home. Only banks, stock markets, insurance, pharmaceuticals, mediclaim, telecommunications, as well as local disaster management, electricity and water supply offices will remain operational.

“Care Ratings had estimated growth of 10.24 per cent in GVA for FY22 for the Indian economy towards the end of the March where it was assumed that there would be return to normalcy during the year. However, with FY22 starting on a sombre note with the lockdown fully in place for Maharashtra and to a lesser extent in other states, overall production and consumption would be affected,” it said.

“The decline in output by around ₹40,000 crore in case of Maharashtra would lead to a dip in GVA growth by 0.32 per cent at the overall domestic economy level. Intuitively, out of the projected ₹137.8 lakh crore of GVA at the country level that we projected for FY22, Maharashtra would account for around ₹20.7 lakh crore which will now decline by around 2 per cent due to this lockdown,” it added.

Potential loss of GVA

Sector-wise, the potential loss of GVA for Maharashtra and hence the Indian economy in trade, hotels, transport and storage, which will be impacted is estimated to be ₹15,772 crore. The loss for financial services, real estate and prof services is estimated to be ₹9,885 crore and ₹8,192 crore for public administration, defence, other services.

The manufacturing sector is likely to record a potential loss of ₹2,931 crore. For construction and electricity, the loss is estimated to be ₹2,584 crore and ₹406 crore, respectively.

Any extension of the same will result in further loss of output from the state, the report said.

“The limited five-day week model would come in the way of growth of even the non-services sector. As movement of people has been curtailed to a large extent, overall consumer demand would also get impacted affecting certain segments in manufacturing Further, less activity in most segments will affect even power consumption and hence the overall production of electricity,” the report said.

“While construction activity is to continue with SOPs in place, the pace is expected to slow down to an extent and new projects would not be taken up because of the uncertainty. The restrictions on functioning of non-essential shops is likely to impact the discretionary retail segment,” it said.

Though e-commerce platforms are expected to benefit to a limited extent, the impact on certain sectors could be more severe on weekends as consumption by individuals will be impacted.

Further downward pressure

Maharashtra is the largest state in the country in terms of gross state domestic product (GSDP) and has a share of around 15 per cent in GVA as per the report. It is followed by Tamil Nadu, Gujarat, UP and Karnataka. Localised lockdowns and other restrictions have been put in place in these other states as well but are not on the same scale as Maharashtra.

“The assumptions of loss of output would vary between 10- 50 per cent for the sub-sectors depending on the extent to which their GVA would be affected due to the lockdown. This will lower India’s GVA growth to 9.92 per cent for FY22 and subsequently GDP growth to 10.7-10.9 per cent under ceteris paribus conditions meaning thereby other states function in a normal manner. If the impact of other state lockdowns is added there could be further downward pressure of another 0.1-0.2 per cent,” the report added.

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