Indian States To See Revenue Loss Of Rs 971 Billion: India Ratings

India Ratings and Research (Ind-Ra) estimates a collective revenue loss of around Rs 971 billion for 21 major states for the month of April 2020 alone, due to the lockdown.

"Typically, April is a time to say good bye to the ending fiscal year and look forward with optimism towards the incoming fiscal year. The new fiscal year heralds a new revenue and expenditure target for both union and state governments.

However, FY21 started amid the countrywide lockdown which has brought the economy to a grinding halt. In fact, the disruption to the production, breakdown of supply chains/trade channels and total wash out of activities in the aviation, tourism, hotels and hospitality sectors have taken place with such a speed and scale that even if the lockdown is lifted by mid-May, the economic activity is unlikely to become normal until 2QFY21" says (Ind-Ra).

The scale of economic disruption has hit the revenues of businesses and government alike. Both union and state governments are struggling due to the dried-up cash inflow; but, the problems of states are more precarious because the actual battle against the COVID-19 and the associated expenditure being incurred by them, India Ratings said.

"Under the current circumstances there is a fair amount of uncertainty regarding the quantum and timings of the state governments' receivables from the union government. Moreover, their own sources of revenue have fallen to abysmally low levels. This is pushing the state governments to adopt austerity measures and combine it with exploring new/more ways of generating revenues," the rating firm said.

"To mitigate the rising liquidity pressure, the Reserve Bank of India and the union government have announced several measures. Ind-Ra has already opined that it would provide only temporary relief to state governments. Now that we are in the month of May and the states have witnessed a full month of lockdown, an assessment of the loss of revenue to the states from their own sources is in order," India ratings said.