States will need years to recover from 'scissor effect' of Covid: RBI

Phenomenon refers to loss of revenues due to demand slowdown, coupled with higher expenditure associated with pandemic, may push the states to great strife

States are witnessing “unprecedented pressures” on their fiscal positions after the Covid-19 pandemic and the next few years are going to be challenging for most of them, according to a report on state finances by the Reserve Bank of India (RBI). 

A possible ‘scissor effect’ - loss of revenues due to demand slowdown, coupled with higher expenditure associated with the pandemic, may push the states to great strife, the report warned. 

"The debilitating combination of compression in tax receipts and ramped-up expenditures has generated unprecedented pressures on fiscal positions at sub-national levels," the report, released on Tuesday said, adding, the