States’ GSDP to contract 1-14% in FY21

The gross state domestic product (GSDP) across India is expected to contract in the range of 1.4-14.3 per cent, according to a report by India Ratings, a Fitch group company.

According to the agency’s estimate, states that will witness a double-digit contraction in the GSDP growth in FY21 are Assam, Goa, Gujarat and Sikkim.

The agency said that it has utilised 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 nationwide lockdown enforced on 25 March 2020, several economic activities defined as essentials remained operational, while the lockdown impacted different sectors, namely agriculture, industry and services differently,” ratings agency said in a statement.

“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.”

As per the statement, 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,” the statement said.

Besides, the report said that 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 state’s own tax revenue 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 statement said.

“The share of SOTR in the total revenue of these states has been budgeted in the range of 57-64 per cent in FY21 and their FY21 nominal GSDP is expected to deviate from the budged nominal GSDP in the range of 15-24 per cent.”