SBI Ecowrap Report: What is the impact on the revenue of states due to COVID-19 lockdown?
The novel coronavirus or COVID-19 which was first identified in China has now become a global pandemic. The governments across the world have imposed lockdowns in their countries to curb and to contain the spread of the coronavirus. India has also entered Lockdown 4.0 which will continue till May 31, 2020. The lockdown which was imposed on March 25, 2020, suspended all the economic activities except the essential activities.
Before imposing the nationwide lockdown, the Central and State governments passed their budgets for the fiscal year 2020-2021. The Central Government estimated a 10% growth in the GDP while most of the states estimated 8-13% growth in the GSDP. However, due to the unprecedented virus and the subsequent lockdown, the GDP and GSDP growth could be lower than the expected growths.
As per a report prepared by SBI Ecowrap, it is predicted that India's GDP has grown by 1.2% in the fourth quarter of the previous fiscal year. This is due to the shutdown of the economic activities and lockdown in the last week of March to contain the spread of the novel virus. The report further states that the GDP growth for the fiscal year 2019-20 is 4.2% and will contract by 6.8% for the fiscal year 2020-21. The GDP for the fourth quarter of the previous fiscal year will be announced by the NSO (National Statistical Office) on May 29, 2020. The report has mentioned a loss of approximately INR 1.4 lakh crore during the lockdown in March (for 7 days).
The report further stated that in the first and second quarter of the previous fiscal year, the GDP was 5.1% and 5.6% respectively, but in third-quarter GDP was 4.7% (seven-year low). The GDP growth will be announced at around 4.2% in comparison to the projected 5% growth.
The report by SBI also mentions that the revenue loss is maximum in red zones as the economic activities are shut down and the combined loss of orange and red zones accounts to 90% loss in total.
Ecowrap has also done state-wise analysis on the GSDP and has concluded that the top 10 states of India account for 70% GDP loss. The total GSDP loss is 13.5%. The top 3 states in this list are:
1- Maharashtra-- 15.6% loss
2- Tamil Nadu-- 9.4% loss
3- Gujarat-- 8.6% loss
These states top the list and also have the highest number of COVID-19 cases in the country. The report has also estimated that the COVID-19 hit patients in the country will increase rapidly in the last week of June. This estimate is based on the average cases in 7 days.