State to suffer ₹80,000-crore shortfall in Q1

Losses calculated on the basis of an input-output model at the time of lockdown

May 07, 2020 08:49 pm | Updated May 08, 2020 12:04 am IST - KOCHI

In a quick assessment of the impact of COVID-19 and the lockdown on Kerala economy, the State Planning Board has estimated that the State will suffer a shortfall of ₹80,000 crore in gross value addition (GVA) in the first quarter of the current financial year.

With negligible production of goods and services, the loss to monthly value addition during a month of lockdown could be about 80%, according to the assessment report.

For March 2020, “assuming about 10 days of total production loss and decreased economic activity from [the] middle of March, we estimate the shortfall in gross value addition to have been roughly ₹29,000 crore. For the first quarter of 2020-21, the entire month of April is affected with near-total disruption in economic activity. It is expected that many of these will continue in May and in subsequent months. This will mean a loss of roughly ₹80,000 crore in Quarter 1, assuming the normal production level in 2020-21 to be about 5% higher than in 2019-20,” says the report, which has made the calculation based on data from the Directorate of Economics and Statistics and suggestions from the Chairperson of the State Statistical Commission. Direct and indirect losses to the economy were calculated on the basis of an input-output model.

Sector-wise losses

Sector-wise losses for agriculture, animal resources, dairying, fisheries, industries and trade, tourism, transport, information technology, power, labour including women’s employment and remittances from Non-Resident Keralites assessed by members and chiefs of divisions of the Planning Board also formed part of the preliminary estimate submitted to Chief Minister Pinarayi Vijayan.

Among industries, most manufacturing enterprises lost about 10 days of production in March, but manufacturing of petroleum products, which account for 20% of the total value added to the State’s manufacturing sector, continued to operate. Units processing food and beverages, which account for 14% of the total value in manufacturing, operated at 50% of capacity while the rest saw total closure.

“It can be assumed that 70% of the manufacturing production in the State was lost due to the lockdown and the disruptions which started from the third week of March. Some of the major factories in the State producing chemicals have started operations from the middle of April... the shortfalls in manufacturing GVA in Kerala are expected to be ₹1,500 crore during March and ₹4,500 crore in April. The shortfalls in GVA may come down to ₹2,000 crore in May and ₹500 crore in June,” it is estimated.

Meanwhile, gross value added by trade as well as hotels and restaurants to Kerala’s economy, which at current prices in 2019-20, was expected to be around ₹1,80,000 crore, took a battering, with just essential services remaining in operation during the lockdown. “It may be assumed that 80% of the GVA from trade, hotels and restaurants is being lost during the lockdown period (10 days during March and 20 days during April 2020). During the last 10 days in April 2020, the income shortfall may come down to 40%, which may come down further to 20% during May 2020,” says the report. The total loss of wages and earnings by self-employed -- 48.1 lakh in Kerala’s workforce of 127 lakh -- and casual workers -- 35.2 lakh -- in Kerala on each day of the period of lockdown was calculated to be about ₹350 crore.

The losses in the tourism sector were estimated to be about ₹20,000 crore. In the IT sector, an assessment done by industry body GTech in association with NASSCOM and CII calculated decline in earning to be about ₹4,500 crore in the first three quarters of the current fiscal. This apart, there could be cumulative loss of about 26,236 jobs and an additional loss of 80,000 jobs in services, transportation, hotels, cleaning and security.

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