A FIRST:

A WORST:

SOME RELIEF:

For several states, the lockdown has come at a huge cost.For the first time in several years, the Gujarat government has had to borrow money from financial institutions, as it has run out of funds due to the Covid-19 outbreak. The state borrowed Rs 2,100 crore at 7.5% a year interest in the first week of this month. Gujarat needs about Rs 3,150 crore every month to pay salaries to its 5 lakh employees and another Rs 1,500 crore to pay pensions and is expected to borrow more to make the payments.The state has about 34,081 factories employing over 17 lakh workers in different segments and most are currently under lockdown. As per the official record of the labour & employment department, there are over 1.5 crore unorganized workers which includes agriculture workers. Also, there are 38 lakh organized sector workers in the state and most of them have got affected due to the lockdown.If key sources in the state’s finance and statistical department are to be believed, the state’s total gross state domestic product (GSDP) is likely to witness a major fall in coming days. “Our average monthly GSDP is around Rs 1.25 lakh crore. We expect a dip in the GSDP of anywhere between Rs 70,000 crore to Rs 1 lakh crore,” said a senior official. Kerala , which many see as the model state in India’s fight against Covid-19, is likely to see its worst economic crisis since its formation in 1956. The state has suffered 82% loss of GSDP during the 21-day lockdown that ended on April 14 based on GSDP figures of 2018-19, according to this report. The Centre has since then extended it till May 3.The loss is estimated as Rs 36,819cr for the 21 days, based on GSDP figures of 2018-19. With the lockdown extended by another 19 days, the projected loss for the state for 40 days will be Rs 70,132cr. The state, which was the first to announce an economic package (of Rs 20,000 crore) for dealing with the current crisis, had to offer 8.96% interest rate for the Rs 6,000 crore it borrowed from the market for 15 years.This will result in negative growth rate of GSDP during 2020-21 and is likely to be the worst economic crisis since the formation of the state. The return of large number of Kerala migrant workers from Gulf countries and the consequent reduction in remittances will worsen the crisis. There will be large fall in the tax and non-tax revenue of the state and will result in to the total collapse of the state’s finances.The impact of the lockdown on employment sector would also be severe with a major humanitarian crisis in the making. The construction sector which accounts for 19% of total employment will experience 100% loss in employment. For informal sector workers, the crisis would be deeper.The financial situation of most other states would be similar and those with stretched finances before the crisis will pay a heavier price. State governments have borrowed over Rs 44,000 crore in the first two weeks of April, according to the RBI data. The crisis has hit states harder than the Centre as a bulk of their revenue comes from indirect taxes on petrol and diesel, alcohol, property transactions etc and sales of most of these had come to a standstill.With the easing of restrictions starting Monday, state revenues from fuel are likely to come as a breather. However, an increase in GST revenues may have to wait for the opening up of the "non-essential" goods and services business. "Nearly 80% of GST revenues come from taxes on non-essential goods and services, while most essential items are either tax-free or under the lowest tax slab,” says Madan Sabnavis, head economist CARE Ratings. The central government, on the other hand, relies on taxes on income and manufacturing, which have been hit but not as badly as the states’ sources of revenue.