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Telangana, Andhra Pradesh economies will contract in FY21

Telangana, Andhra Pradesh economies will contract in FY21Telangana, Andhra Pradesh economies will contract in FY21
Highlights

  • Telangana will see 3.2% fall in GSDP while Andhra Pradesh, will be least impacted : India Ratings
  • AP's higher dependence on agriculture seem to have come to its rescue as its projected GSDP contraction, at 1.4 per cent, is least among all the States. In the case of Telangana, it is IT and IT enabled services which came to its rescue

Hyderabad: Hit by Covid-19 crisis, State economies in Telangana and Andhra Pradesh are projected to contract during the current financial year, according to a report released by India Ratings & Research.

As per the report, Telangana is estimated to register 3.2 per cent fall in GSDP (Gross State Domestic Product) during 2020-21.

Interestingly, Andhra Pradesh will see lower contraction in GSDP as India Ratings, owned by global rating agency Fitch, has estimated that AP's GSDP will fall or de-grow by just 1.4 per cent in the current financial year. As consequence, AP is the least affected by the Covid-19 induced lockdown among all the States.

Telangana will also witness significant fall in tax revenues. "State's own tax revenue (SOTR) is a function of the nominal GSDP of the State. 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 SOTR 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 Telangana, Maharashtra, Gujarat, Tamil Nadu, Kerala and Haryana," the report stated.

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

According to the report, the five major States where impact of lockdown was the least pronounced are Madhya Pradesh, Punjab, Bihar, Andhra Pradesh and Uttar Pradesh. Similarly, the top five major States where impact of lockdown was the most pronounced are Karnataka, Jharkhand, Tamil Nadu, Kerala and Odisha. Interestingly, Andhra Pradesh's higher dependence on agriculture seem to have come to its rescue as its projected GSDP contraction, at 1.4 per cent, is least among all the States. "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," the report said.

In the case of Telangana, it is IT and IT enabled services which came to its rescue. "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 report explained.

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, it added.

As per the report, the GSDP across India is expected to contract in the range of 1.4-14.3 per cent. States that will witness a double-digit contraction in the GSDP growth in FY21 are Assam, Goa, Gujarat and Sikkim. Goa tops the list with an estimated GSDP contraction of 14.3 per cent while Gujarat is at 2nd place with - 12.4 per cent.

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