Covid-19: Shoring up states financial muscle in times of a crisis

In view of the ongoing crisis, the government has come up with several measures to aid the economy.
 

Recently it allowed states to avail of up to 50 per cent of their 2020-21 (FY21) borrowing requirements.
 

Here’s the latest on the coronavirus outbreak and government measures to contain its impact on the economy:
 

Last month, even before the Reserve Bank of India (RBI) issued the indicative borrowing calendar for the states for April-June and the one for the Centre for April-September, the Centre gave states the permission to borrow up to 50 per cent of their limit.
 

Here is what this means:
Even in normal times, states have their fiscal limits to borrow. While those fiscal responsibility and budget management limits are still in place, officials at the Centre and in states acknowledged that these are not normal times.
 

Now, according to the RBI’s indicative calendar for borrowing by the states in the April-June quarter, they are expected to borrow Rs 1.27 trillion. Of that, around Rs 55,225 crore is expected to happen in April. That amount, and the estimate for the quarter, will certainly be breached.
 

While there are no official estimates of how much states will borrow in FY21, as all the state budgets are not out yet, economists like Soumya Kanti Ghosh of State Bank of India estimate it could be close to Rs 7 trillion.
 

Besides, on Thursday, Prime Minister Narendra Modi held a video conference meeting with chief ministers of various states on the handling of the Covid-19 pandemic. A day later, the finance ministry released Rs 17,287.08 crore to states in revenue-deficit grants and state disaster response mitigation funds for FY21.
 

However, the amount released by the finance ministry is just a fraction of what states have been demanding, in financial support as well as clearing pending dues.
 

And to this, Central government officials say there is understandably a resource crunch, but more will be given to states.

Now, speaking state wise, Maharashtra had sought a special package worth Rs 25,000 crore from the central government and asked it to release pending dues worth Rs 16,654 crore under various heads by March 31, to fight the economic crisis stemming from the new Covid-19 outbreak.
 

Tamil Nadu has sought a special assistance of Rs 4,000 crore and a slew of other forms of financial support. West Bengal has also asked for a package of Rs 25,000 crore and clearance of dues worth Rs 36,000 crore. Additionally, all states have sought relaxation of their borrowing limits.
 

Now, coming to the latest on the coronavirus outbreak. In India, the number of cases saw a dramatic increase of over 700 to 4,298 and death toll rose to 118, according to the Worldometer data. Meanwhile, amid criticism for not reaching out to the Opposition even as the country faced a grave health crisis and a 21-day lockdown, Prime Minister Narendra Modi on Sunday called up several Opposition leaders, including Congress interim president Sonia Gandhi, besides former prime ministers and presidents of the country.
 

Globally, the death toll surpassed 69,479 and the number of infections rose to 1,274,346. The US death toll is nearing the 10,000-mark, even as the total number of cases in that country now stands at 3,36,670. In the UK, Prime Minister Boris Johnson was admitted to a hospital because of “persistent” symptoms of the coronavirus, a spokesman confirmed on Sunday.