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Pawar demands grant of ₹1 lakh crore from centre to overcome financial crisis
Nationalist Congress Party (NCP) chief Sharad Pawar has demanded a generous financial package for Maharashtra to tide over the economic crisis due to the lockdown
Nationalist Congress Party (NCP) chief Sharad Pawar has demanded a generous financial package for Maharashtra to tide over the economic crisis due to the lockdown imposed to arrest the coronavirus outbreak.
Pawar, in a letter to the Prime Minister Narendra Modi and Union finance minister Nirmala Sitharaman on Saturday, has sought an additional grant of ₹1 lakh crore for this fiscal. He said the state is estimated to face a shortfall of this amount due to the outbreak.
He has also demanded a two-year moratorium on repayment against a loan from National Small Savings Fund (NSSF) citing that it will help in bridging the likely budgetary gap.
The state makes repayment of ₹10,500 crore for NSSF loan every year. “So far, Mumbai is the hardest-hit city in the Covid-19 outbreak and the prolonged lockdown conditions. This has severely impacted the economy of Maharashtra and may have detrimental consequences on Indian economy if not addressed urgently,” Pawar stated in his letter.
He said that there is an expected revenue shortfall of ₹140,000 crore. This is around 40% of the expected revenues and will leave a huge hole in the state finances.
“As per the present borrowing limits (3% of GSDP), the state can borrow up to ₹92,000 crore, of which ₹54,000 has been planned for meeting the capital expenditure requirements. So, it is clear that state is going to face a shortfall of ₹100,000 crore to sustain projected expenditure,” he said.
The veteran leader also suggested some other measures to help Maharashtra, including hiking the borrowing limit under the Fiscal Responsibility and Budget Management Act (FRBM), but cautioned that covering the entire shortfall only through borrowing will push the state towards a potential debt trap.
Pawar said that cut in public spending can also be used as a measure, however, that would be counterproductive given the subdued economy. “There will be additional expenditure requirements in the area of public health and medical education and other public services,” he pointed out.
“Almost all countries US, Spain, Germany, France, Australia etc have released financial packages of around 10% of GDP. Thus, a room can be created by the Government of India along with RBI for giving suitable financial package to states,” the letter states.
“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 added.
