Crisil shared some interesting data that in lockdown 3.0, there were eight states in which the share of the districts that could be classified in the red zone were higher than the national average. Now these eight states contribute 60% to India’s GDP. So obviously since the number of red zones are higher, the lockdown is going to be a bit longer in these states. What sort of an impact do you anticipate?
We are in the process of revising our estimates. I think what this study did was it pointed out where the problem resided and as far as the lockdowns are concerned, it is a pretty complicated phenomenon to analyse from the economy's GDP perspective. Number one, they are non-linear. If you have a lockdown for let us say two months, it is much more than two times the lockdown for a month. Similarly, even if you have parts of the lockdown being relaxed, the supply chain still remains disturbed. So the impact on the output may not be appropriately captured by the lockdown that you see by dividing the zones. Having said that, the impact on GDP is going to be quite significant. As I said, we are in the process of working out the national level GDP impact and we will be releasing it in the evening today.
The states which have a heavy presence of Covid-19 and at the same time have their debt levels high are Andhra Pradesh, Rajasthan and Uttar Pradesh. Some states are fiscally vulnerable but they have Covid-19 under control. From the point of view of GDP or an output overall, I think three states are very central. One is Maharashtra because the share of industry and services in this state is very high. Second is Gujarat and the third is Tamil Nadu. I think an interesting aspect of the implications of Covid across states is that agriculture is not going to be impacted to that extent as the non-agriculture is going to be. This is very different from the past recessions that we saw 50 to 60 years back where agriculture used to lead. So states which are more agriculture-led are likely to be somewhat marginally better off.
Absolutely. I think the shape of reaction or the contours of reaction from different states and different entities will depend on how the virus plays out and as we know, it is not playing out in a similar manner across all states. So the containment strategy and the opening up strategy will vary from state to state and I think in states like Tamil Nadu, Maharashtra and Gujarat, getting the virus under control will be the primary objective because it is increasing at a very fast pace. For other states where things are a little bit under control, they can start opening up in a different manner. So it is going to be a completely different story that plays out across different states.
Everybody is saying that April was a month where in the first 20 days, there was absolutely no activity and then things gradually started. Across industries, 30-50% is the sort of pre-Covid level numbers that one is getting; whether you talk about production or demand or some activity going up. Do you think getting back to full normalcy could take a lot of time?
Absolutely. I think it will take a lot of time not only from the perspective of virus control but even for people to start getting back to normal. I think there will be a lot of hesitancy to do a lot of things like going out and seeing movies or indulging in sports activity. So clearly there are some parts of the economy which will be deeply influenced by the behavior changes. I think it does not look like we will get back to normal any time soon. I mean at least right now, we are in a state where the Covid curve is yet to flatten out; so it is an uncertain zone.
I think this uncertainty between containment and opening up will continue till the time we have a vaccine, which is clearly some time away. But I think what is also being realised is that since the government does not have enough fiscal muscle to offset the impact of lockdowns, some opening up is inevitable and we might see areas like construction open up where the labour intensity is extremely high. So it will be a gradual process. I do not see 100% normalcy at least in one year’s time. I think it is clearly not visible.
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