Breaking it down to the state, there was a stark difference in the decline between states, with a total of 8 states and union territories (UTs), which constitute as much as 47 per cent of India’s GDP, expected to witness a decline in PCI in double digits in FY21.
“Our estimates suggest that rich states (states whose per capita income is greater that all India average) will be most affected in per capita income terms,” the report said.
The report said that Delhi and Chandigarh may see a decline of 15.4 per cent and 13.9 per cent respectively, which would be nearly three time the decline at all-India levels.
“This is due to the fact that these are the urban areas (and red zones also) where lockdown was implemented most severely,” the report said about 8 states and UTs where the PCI decline was likely in double digits.
“The closure of markets, shopping complexes and malls adversely affected income of these areas. Even after opening of markets (in a staggered manner), the number of customers is still 70-80 per cent less than the normal times,” it added.
The report said states such as Maharashtra, Gujarat, Telangana, and Tamil Nadu are expected to witness a decline of 10-12 per cent in PCI in FY21, while in the relatively less well-off states like Madhya Pradesh, UP, Bihar, Odisha, etc., where per capita income is below the national average, the decline in PCI is less than 8 per cent.
“The possible reasons are a larger number of green zones, prominence of agricultural activity and already low levels of income,” it said.
SBI’s economics wing expects the inequality gap in India to narrow down post Covid-19 pandemic as decline in income of rich states will be much greater than the decline in income of poorer states.
It pointed that a similar type of experience of decline in inequality was witnessed in Germany after the collapse of Berlin Wall in 1989, and post collapse the per capita GDP of West Germany, which was already higher than East Germany, had decelerated while per capita GDP of East Germany increased resulting in decline in inequality.
It projected a 6.8 per cent decline in India’s GDP for FY21, and believed that India will clearly have a “statistical V-shaped recovery/Swoosh” in FY22 primarily due to the favourable base effect.
“Beyond such base effect, it would however take at least till FY24, if India replicates the best case example in history, if not more before India gets back to pre-pandemic level growth rate,” it said in the note.
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