India’s nightmares of second covid wave have returned. In it, Maharashtra seems to have been affected the most severely. With its burgeoning cases, authorities have cautiously decided for a stringent lockdown. Maharashtra has been grimly contributing nearly 60 per cent to the daily COVID-19 infections nationally.
To mitigate the disaster, the state government has enforced a lockdown which entails complete shutdown at nights and on weekends, and limited activity during weekdays. The measures are expected to last for a month.
But Maharashtra’s “radical” lockdown move will have an economic impact of Rs 40,000 crore on the economic growth. According to the Care Ratings, the sectors which will bear the biggest dent are –the trade, hotels and transport sector.
The rating agency stated that the loss of economic activity will have a 0.32 percent impact on the gross value added (GVA) growth at the overall domestic economy level. It additionally has revised down its national GDP growth estimate to 10.7 – 10.9 percent from the 11 – 11.2 percent given a week ago.
The agency said., “…with FY22 starting on a somber note with the lockdown fully in place for Maharashtra and to a lesser extent in other states, overall production and consumption would be affected,”.
For the FY 22, at the country level, Rs. 137.8 lakh crore had been projected for GVA, of which Maharashtra had accounted for around Rs. 20.7 lakh crore, of which 2% can now be lost in oblivion with stringent lockdown in place. The Care Ratings explained that the loss of income would be based on the relative share of Maharashtra in various sectors, and the one-month impact of lockdown on them.
From a sectoral perspective, the rating agency maintained that trade, hotels and transport will bear a total hit of Rs 15,772 crore. This loss will be closely followed by the loss in the sectors like financial services, real estate and professional services which will presumably see loss of Rs 9,885 crore, and public administration at Rs 8,192 crore.
It is to be noted that Maharashtra is the largest in terms of GSDP and has a share of around 15 per cent in GVA, followed by Tamil Nadu, Gujarat, Uttar Pradesh and Karnataka.
According to the Care Ratings, 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.
Additionally, lesser economic activity in other segments will emphatically affect the power consumption, and hence the overall production of electricity. This will directly affect the pace of construction which will slow down and will impact the new projects which will be either stalled or will not be taken up.
The lockdown, as aforementioned, will adversely affect the trade, hospitality and aviation sector but will indirectly also have an impact on the functioning of non-essential shops. This will likely impact the discretionary retail segment. But as it is widely known, Covid crisis have proved to be a boon for the e-commerce platforms, similarly this sector is expected to benefit to a limited extent