Covid-hit lockdown stalls Karnataka’s growth story: Experts

Bengaluru: A view of Bengaluru's busy KR Market amid Unlock 1.0 or phased relaxation during the fifth phase of the nationwide lockdown imposed to mitigate the spread of coronavirus, on June 15, 2020.

Bengaluru,(Samajweekly) The unprecedented and extended lockdown to contain the coronavirus spread has virtually stalled Karnataka’s growth story, as development plans envisaged in the state budget for fiscal 2020-21 remain a non-starter, said experts.

“As the virus disrupted normal life, paralysed every sector and crippled the economy as never before, development and growth will depend upon when Karnataka will get over the pandemic, as the entire state machinery is busy in grappling with the infection,” noted economist M.R. Narayan told IANS here.

Within 10 days after Chief Minister B.S. Yediyurappa presented the state budget for this fiscal on March 5, he announced a partial lockdown in this tech city from March 16 and extended it to March 31 even before Prime Minister Narendra Modi declared a nationwide lockdown from March 25 and extended it up to May 31 with gradual relaxations of its restrictions to restore normal life.

“With every activity coming to a standstill, including movement of people in cities and towns across the state due to the extended lockdown, there was neither spending nor consumption. Unfortunately, like the rest of the country and other states, Karnataka too ended fiscal 2019-20 and began the new fiscal (2020-19) on a grim note, with its estimates and projections going haywire,” said another economist on the condition of anonymity.

Though farming, including sowing and harvesting were allowed from April first week, absence of labour, closure of agro-processing units and drastic fall in bulk consumption of perishable goods like vegetables and fruits as hotels, places of worship, conventions and weddings were shut.

“Suspension of public transport, prevention of private vehicles and ban on movement of people during the first six weeks of lockdown snapped the supply chain and the perishable farm produce could not reach markets in cities for sale or consumption,” lamented Narayan, a professor at the state-run Institute for Social and Economic Change (ISEC).

In the manufacturing sector, the prolonged lockdown till May 3 and the flight of migrant workers since then stalled production across micro, small and medium industries. Even the large industries could not resume normal operations as the supply chain of raw materials and components snapped.

“Even if production has resumed with Covid-induced rules and regulations to keep social distancing, wearing masks and sanitising the shopfloor, where is the demand for consumption. Growth will revive only after normalcy is restored across sectors,” asserted Narayan.

Though Yediyurappa, who also holds the finance portfolio, presented a surplus budget for fiscal 2020-21 despite Rs 11,887 crore reduction in central funds to the southern state for fiscal 2019-20, an official admitted that poor revenue collection in the first three months or quarter (April-June) in the absence of economic activity would make the state end with a fiscal deficit.

“As the state will take at least another quarter to restore normalcy, we expect growth revival in the second half of this fiscal if the monsoon remains normal and there is no further disruption in economic activity,” an official of the state finance department told IANS.

In the services sector, which contributes 55-60 per cent to the state gross domestic product (SGDP), barring the software industry all other segments like hospitality, tourism, travel, entertainment, transport and even health sector have suffered maximum losses as the lockdown grounded them to a halt.

“I think the state government will have to redo the math and revise its budgetary estimates and projections it made for the fiscal as they were done before the virus hit the state and the country,” another expert said.

With Bengaluru alone contributing about 60 per cent of taxes and revenues to the state exchequer, prolonged lockdown and suspension of all activities that drive consumption have also dented revenue receipts.

“As the state government has not budgeted for the sudden and unexpected expenditure on fighting the virus, most of the funds and resources allocated to other sectors are being diverted for healthcare despite poor revenue collections. Development schemes and infrastructure projects will be badly affected unless the state borrows heavily and the central government grants more funds to meet its runaway expenditure,” added Narayan.