CARE Ratings Forecasts Maharashtra’s GVA Growth to Dip by 0.32 Per Cent Due to Lockdown

CARE Ratings Forecasts Maharashtra’s GVA Growth to Dip by 0.32 Per Cent Due to Lockdown

Credit rating agency CARE Ratings has forecast a dip in Maharashtra’s gross value added (GVA) growth by 0.32 per cent at the domestic level for the financial year 2021-22 (FY22). This is mainly due to the fresh curbs imposed in the state as a result of the coronavirus pandemic. 

The agency had previously predicted a 10.24 per cent growth in GVA for FY22 by the end of March. This was based on the expectation that COVID-19 would be under control by this time. However, the fresh lockdown imposed by the state government in the midst of rising cases has led to the agency modifying its forecast. CARE Ratings believes that the restrictions will lead to a fall in production as well as consumption. 

Chief Economist at CARE Ratings, Madan Sabnavis wrote, “Intuitively, out of the projected Rs 137.8 trillion of GVA at the country level that we projected for FY22, Maharashtra would account for around Rs 20.7 trillion, which will now decline due to this lockdown.”

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Though other states in the country are also seeing some form of restrictions, Maharashtra is expected to be impacted more due to the higher level of restrictions in place as compared to other states, and also because the state has a GVA share of around 15 per cent. Maharashtra also happens to be the largest state in India as per the Gross State Domestic Product (GSDP) index. 

“Against these new guidelines, our projections are that around Rs 40,000 crore of GVA will be impacted based on a single month of lockdown. Any extension of the same will result in further loss of output from the state,” CARE Ratings added. 

Although non-essential outlets are unlikely to function in the same capacity as they did previously, the CARE Ratings added that e-commerce retailers are likely to see a marginal benefit. 

Despite the grim forecast by the agency, analysts at Nomura are of a different opinion with regard to the economic impact of the new lockdown and curbs. 

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Sonal Varma, Managing Director and Chief India Economist at Nomura said in a note co-authored by Aurodeep Nandi, “Our estimates suggest that the sectors ‘at-risk’ account for less than 6 per cent of the economy. Second, firms and consumers have rapidly adjusted to the new normal and the relationship between (lower) mobility and (weak) economic activity has been weakening over time. The ultra-high frequency data for March and early April, released since the renewed lockdowns were announced, seem to largely corroborate this."

Analysts also believe that vaccinations are going to help the country get back on track. While there are some parallels between the surge in COVID-19 cases now and last year, the government has the advantage of possessing two vaccines that can soften the impact to some degree. However, going by the cases registered in India over the last few weeks, it’s clear that the battle with the virus is far from over.

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