Economic cost of the second lockdown in Maharashtra

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The second wave of Covid-19 pandemic is much stronger and deadlier and has once again collapsed the healthcare system in India. With Maharashtra being the epicentre of COVID-19 Chief Minister Uddhav Thackeray on April 13, 2021, announced a “mini lockdown” in the State for 15 days from 8 p.m. from April 14, 2021.

With the situation worsening on April 20, 2021, the Maharashtra government further tightened the restrictions and allowed grocery and food shops to remain open only between 7 am to 11 am till May 1, 2021. However, home delivery from such shops will be allowed between 7 am to 8 pm, at the discretion of local authorities. On April 21, 2021 Maharashtra government capped attendance in offices at 15% and restricted travel in suburban trains, metro and monorail to allow only government employees, medical staff and those seeking medical treatment.

With restrictions getting severe day by day India’s richest state Maharashtra from April 5 is estimated to chip off Rs 40,000 crore from India’s gross domestic product during the current financial year that ends in March 2022, according to Mumbai-based CARE Ratings.

The Rs 40,000 crore loss is assumed based on a single month of lockdown. Any extension of the same will result in further loss of output from the state.

“The decline in output by around Rs 40,000 crore in the case of Maharashtra would lead to a dip in gross value added (GVA) growth by 0.32% at the overall domestic economy level. Intuitively, out of the projected Rs 137.8 lakh crore of GVA at the country level that we projected for FY22, Maharashtra would account for around Rs 20.7 lakh crore which will now decline by around 2 per cent due to this lockdown,” said the rating agency in a report.

Sector-wise, the potential loss of GVA for Maharashtra in trade, hotels, transport and storage, which will be impacted is estimated to be Rs 15,772 crore. The loss for financial services, real estate and prof services is estimated to be Rs 9,885 crore and Rs 8,192 crore for public administration, defence, other services.

The manufacturing sector is likely to record a potential loss of Rs 2,931 crore. The construction sector stands to lose Rs 2,584 crore whereas the electricity sector loss is capped at Rs 406 crore.

Further, the spread of the virus to other states has caused similar actions by governments which have ranged from night curfews and weekend lockdowns to full lockdowns. Citing this Care Ratings has revised down its forecast for GDP growth to 10.2% in 2021-22 from an earlier projection of 10.7-10.9%. This is the third revision by the rating agency in the last one month.