Gross state domestic products to see sharp declines in FY21

All states are expected to see a contraction in their gross state domestic products (GSDP) this fiscal, averaging a sharp 6.3% decline, according to a report by India Ratings and Research (Ind-Ra) on Monday.

With contractions ranging from 1.4%-14.3%, four states will witness double-digit GSDP declines, the report said. Goa is likely to be worst affected at the upper end of the range, followed by -12.4% for Gujarat and -10.9% and 10.7% for Sikkim and Assam respectively.

As agricultural activities were considered as essential services and were less impacted by the lockdown, states with a higher share of agriculture took a relatively smaller hit than others, it said.

Similarly, the high levels of digital penetration in the operations of IT, IT enabled, banking and financial services cushioned the lockdown impact on these sectors, giving an advantage to states with a high share of these activities.

Among the major states, those likely to be most impacted over the fiscal were Karnataka, Jharkhand, Tamil Nadu, Kerala and Odisha, whereas the least affected would be Madhya Pradesh, Punjab, Bihar, Andhra Pradesh and Uttar Pradesh.

Further, given that the states’ own tax revenue (SOTR) is a function of nominal GSDP, states with a high share of SOTR in their total revenue would see a more pronounced impact than others, according to the report. The most vulnerable states in this respect are Maharashtra, Gujarat, Tamil Nadu, Kerala, Telangana and Haryana.

These states are likely to see a higher deviation in nominal GSDP compared to budgeted GSDP of around 15-24%, it said, since they have budgeted for SOTR at between 57-64% of their respective total FY21 revenues.