Punjab CM Captain Amarinder suggests PM Modi 3-pronged strategy to bail out states

In a letter to Prime Minister Narendra Modi, Amarinder urged him to ask the 15h Finance Commission to review its interim report for 2020-21 in the context of the much lower revenue share for the states compared with what was expected from the earlier projections which assumed 7% growth of GDP

Punjab chief minister Capt Amarinder Singh on Tuesday suggested to the Centre a three-pronged strategy to bail out the states from the Covid-19 crisis, including a 3-month special financial package and extension to the 15th Finance Commission till October 2021 for submission of its final report.

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In a letter to Prime Minister Narendra Modi, Amarinder urged him to ask the 15h Finance Commission to review its interim report for 2020-21 in the context of the much lower revenue share for the states compared with what was expected from the earlier projections which assumed 7% growth of GDP.

Noting that a zero growth scenario in GDP for India was not unlikely, he said that some analysts were projecting even negative growth. Given the likelihood of very low growth, which was expected to cause the revenue shortfall to last for the whole year, he requested the PM to direct the Finance Commission to defer the submission of its full report to October, 2021 for a realistic assessment of the likely growth of the economy over the next five years. “Nothing would be worse than getting committed to a five year revenue sharing projection based on unrealistically high growth projections,” he warned.

The CM further said with the states continuing to shoulder their committed liabilities and facing new demands on relief, health infrastructure expenditure etc., it was only fair and just that the Finance Commission should be requested to recommend a Special Covid-19 Revenue Grant for the year 2020-21. He also sought an immediate 3-month special financial assistance package to enable states to handle the additional health-related expenditure and basic relief expenditure, adding that the immediate 3-month package may be adjusted against the Special Covid-19 Revenue Grant.

Further noting that this grant would increase the fiscal deficit of the central government, Amarinder suggested that the same should be financed through a special borrowing programme outside the ambit of the Fiscal Responsibility and Budget Management (FRBM) Act provisions. He also proposed increasing the deficit to make up the revenue shortfall, as was being done by other nations.