Analysis of macro-economic impact of COVID-19 and Development of responsive financing Model for the state of Chhattisgarh Completed

Duration: October 2020 – September 2021

Status: Completed

Funder/ Partner: UNICEF Chhattisgarh Office

In addition to being a global public health crisis, COVID-19 has also severely affected the global economy at all levels, from national to sub-national. Significant reductions in income, rise in unemployment and disruptions in transportation, service and manufacturing industries are the consequences of the pandemic. Supply chain disruptions due to the cease/slowdown of economic activities will lead to further impact on economic growth in the near-term future. The COVID-19 crisis has impacted the growth of world economy severely by affecting most of the sectors and India is no exception.  The pandemic and the lockdown are also expected to have differential impact on different sectors. Thus, the structure (relative presence of agriculture, manufacturing and service sectors) of the economy of a state will be one of the determining factors in the extent of economic losses suffered by the state.

While the Covid-19 has created huge impact on sectors across Indian states, few states have managed to thrive and combat the sliding economy. Chhattisgarh is one of these states which has managed to improve the GST collection during the pandemic and also in keeping the unemployment levels low at 3.4%. Despite the lower level of vulnerability of the state so far, however, its revenues are going to be impacted adversely due to the decline in economic activity in the state and the probability of reduced transfers from the central government. At the same time, the government is likely to incur higher expenses to manage the pandemic and to ensure social protection in an year of widespread disruptions in the economy. Ensuring funds for regular investments in the social sector, including women and child development, becomes crucial in such a context.

Considering these complex factors, there is a need to understand the implications of pandemic with respect to revenue sources in greater detail and also to formulate strategies for prioritizing the expenditure.  The analysis will have to be disaggregated in nature and has to take into account different sectors and sub-sectors of the economy and the impact of Covid 19 on these sectors. Accordingly, this study aims to estimate the extent of revenue loss likely to be experienced by the Government of Chhattisgarh and arrive at the strategies for incurring expenditure in ensuring social protection for the vulnerable, especially women and children.  The study also aims to understand the impact of the pandemic on various sectors including social sectors and assess the fiscal space based on the forecast of expenditure needed and potentiality of mobilising the resources. The study will also explore innovative alternatives through which the additional funding can be mobilised to manage the shortfall, if any.