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Andhra Pradesh, Rajasthan and Uttar Pradesh fiscally vulnerable as lockdown continues, says report

Andhra Pradesh, Rajasthan and Uttar Pradesh fiscally vulnerable as lockdown continues, says report

Andhra Pradesh, Rajasthan and Uttar Pradesh fiscally vulnerable as lockdown continues, says report
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By CNBC-TV18 May 19, 2020 3:24 PM IST (Published)

Andhra Pradesh, Rajasthan and Uttar Pradesh are fiscally vulnerable due to relatively higher debt ratios, while Maharashtra, Tamil Nadu and Gujarat are more vulnerable to output losses as a consequence of the ongoing coronavirus-forced lockdown in the country, according to a Crisil report.

Andhra Pradesh, Rajasthan and Uttar Pradesh are fiscally vulnerable due to relatively higher debt ratios, while Maharashtra, Tamil Nadu and Gujarat are more vulnerable to output losses as a consequence of the ongoing coronavirus-forced lockdown in the country, according to a Crisil report.

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The report notes that eight states had more districts classified in the red zone than the national average. These eight states contribute three-fifths of India’s GDP and 58 percent of its workforce.
Of these states, “Maharashtra, Tamil Nadu and Gujarat, being most dependent on output from industry and services, are more vulnerable to output losses as they face restrictions," said the Crisil report.
It added: “Andhra Pradesh, Rajasthan and Uttar Pradesh are fiscally more vulnerable due to relatively higher debt ratios. These states also have high dependence on revenue sources from petroleum, liquor and stamp duty.
“Andhra Pradesh, West Bengal and Tamil Nadu have higher share of informal workforce, which is vulnerable to job losses.”
Among the states, Gujarat and Rajasthan are most dependent on petroleum tax, while Uttar Pradesh and Telangana are particularly dependent on liquor excise. Maharashtra and Uttar Pradesh are heavily dependent on stamp duty.
Owing to the drying up of revenues, a number of states in the past few weeks have allowed liquor stores to open while significantly raising taxes on them. Some states have also raised excise on fuel.
The Crisil report added that the first two phases of the lockdown had a near uniform impact on all states owing to the uniformity of restrictions across the country.
However, with the third phase allowing categorisation of districts in zones with some relaxations in economic activity. and additional relaxations in the fourth phase will have an unequal impact on the state’s coffers.
Among the states with a high incidence of coronavirus cases, West Bengal, Andhra Pradesh and Tamil Nadu, with their higher proportion of casual labour workforce, will be adversely affected due to the lockdown.
Andhra Pradesh, Gujarat and Rajasthan comprise a higher proportion of regular salaried workforce without a valid job contract, putting the states at risk of facing the brunt of the lockdown.
The nationwide lockdown in India began on March 25 for an initial 21 days. However, it has been extended thrice and the latest extension will see the end of May.
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