Mumbai: Nationalist Congress Party (NCP) Chief, Sharad Pawar in a letter to Prime Minister Narendra Modi and Union Finance Minister Nirmala Sitharaman has argued that just as the Center has announced relief packages for various sectors of the economy, similar relief packages be also given to the State’s as well.
He argued that although the raising of the borrowing limit of the states under the Fiscal Responsibility and Budget Management Act could be one way out, but the move to force states to rely solely on market borrowings would push the states further in a debt trap. He argued that one option could also be minimizing public expenditure.
The NCP chief while making some suggestions for fiscal stimulus to revive the economy argued that the state’s economy has been badly hit in the aftermath of the Coronavirus pandemic. Pawar in his two-page letter to the PM Modi pointed out that Mumbai has been highly affected in the novel coronavirus outbreak. Mumbai is the backbone economy of India. Pawar in his letter contended that there could be detrimental consequences in future if this situation is not handled swiftly.
“Almost all countries like US, Spain, Germany, France and Australia have released financial packages of around 10% of their Gross Domestic Product (GDP). Thus, a room can be created by the Government of India along with RBI for giving suitable financial package to states,” said Pawar.
Pawar, in his letter highlighted that the state had expected a revenue income of Rs 3,47,000 crore, but now due to the lockdown, the state is now expecting a revenue deficit of Rs.1,40,000 crores. He said that as per the present 3 percent borrowing limit, the state can borrow up to Rs 92,000 crore, out of the borrowings of Rs 54,000 crore that have been planned for meeting the capital expenditure requirements for this financial year. “So, it is clear that state is going to face a shortfall of Rs 100,000 crore to sustain projected expenditure,” letter reads.
The NCP chief in his letter further stated “the other strategy could be to cut public expenditure, however, that would be counterproductive in view of the subdued economy. In fact, there will be additional expenditure requirements in the area of public health and medical education and other public services”. However, he acknowledged that both these options could be counterproductive.
Hence he recommended to the Centre to extend a two-year moratorium on repayment of the National Small Savings Fund Loan by the state governments. He also requested financial assistance to the Maharashtra government to the tune of 1 lakh crore for FY 2020-21.
“In the eventual recovery of the Indian economy the states will play a major role and if left out without any help the states will not be in a position to supplement the required national government efforts,” he said.
