States with red zones account for 60% of GDP

Mumbai: There are eight states, with high concentration of red zones, which account for 60% of the country’s GDP and 58% of the workforce at the end of the third phase of the lockdown. This could prove to be a major challenge for reviving economic activity.

Three states — Maharashtra, Tamil Nadu and Gujarat — are most dependent on output from industry and services, and more vulnerable to losses as they face restrictions, according to a Crisil report. Another three states — Andhra Pradesh, Rajasthan and Uttar Pradesh — are fiscally more vulnerable because of their higher debt ratios. Andhra Pradesh, West Bengal and Tamil Nadu have a high share of informal workers, which increases the risks of unemployment.

“India has entered the fourth phase of lockdown necessitated by the Covid-19 pandemic. At the all-India level, the virus spread and lockdowns, and restrictions have pummelled economic activity. While all states were near-uniformly hit during the first and second lockdown phases, the third and fourth would impact them differently,” said Crisil in a research report.

The eight states account for 66% of manufacturing, 60% of construction output and 53% of total services in India. Of the 58% of Indian workforce these states employ, 24% are salaried, 26% are casual labour and 50% are classified as self-employed.

Gujarat and Rajasthan will see their revenue hit too because they are highly dependent on petroleum tax. Uttar Pradesh and Tamil Nadu have taken a hit because of dependence on liquor. Besides this, stamp duty — a main revenue source for Maharashtra and Uttar Pradesh — has dried up because of the absence of property transactions during the lockdown.