As India is facing the continuous rise in the Covid-19 cases, economists say that the economy of India will not be in a very good state after the pandemic. Especially the richest states and Union territories like Delhi, Maharashtra, etc. It is estimated that the richest states will see the biggest declines in per capita income because they are urbanized and all the labours are migrating.
As stated by the economist at SBI, Smt. Kanta Ghosh, “Eight of the wealthiest states and union territories will post double-digit contractions in income in the fiscal year through, March 2021, with Delhi being the hardest hit. The states constitute almost half of India’s gross domestic product.
According to the list issued by the State Bank of India, Delhi followed by Chandigarh, Gujarat, Tamil Nadu, and Telangana will face the highest percentage change in the per capita income. Because of the contagious virus, the Indian government implemented the lockdown phase very early in the country, but with the ease of the lockdown the virus spread throughout the country and soon all the major states and Union Territories like Mumbai and Delhi became the hotspot or epicenter of the virus. Thus, all the malls, stores, and other public places are still not open. In addition to that, many major production activities are under halt, making it a major reason for a halt in the economy as well.
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In regards to that, the report given by the SBI, states that the country as a whole would face a 5.4% decline in per-capita income this fiscal year, which would be higher than the estimated 3.8% drop in nominal GDP which will ultimately increase in income inequality.
States with less per capita income like Madhya Pradesh, Uttar Pradesh, Bihar, and Odisha will probably see the drop in the per capita income of 8%, as stated by State Bank of India, the reason being the higher number of green zones in these areas. In these areas, some economic activities are also allowed to resume and slowly the situation is becoming normal in these areas.
According to the economist of SBI Ms. Ghosh “The government should provide a more aggressive policy response to cushion the blow from the pandemic, adding that in past global financial crises, countries that were fiscally conservative took longer to recover than others. According to the report, lockdown India faced a hit of Rs. 30.3 lakh crore, which is a dip of 13.5 % overall GDP that the SBI attributes directly to COVID-19. Further, the combined loss of orange and red zones is around 90%. The loss in the green zone is the least 80% of the population in this zone is located in rural areas which are almost open for all activities.