More borrowings will provide much-needed liquidity: Khattar
CHANDIGARH: The central government’s decision to increase the borrowing limits of states from 3% to 5% of the gross state domestic product (GSDP) for 2020-21 will help open up the fiscal space and provide much needed liquidity for the financially stressed Haryana government.
The state government has been struggling to raise financial resources even after the resumption of economic activity post-april 20 relaxations.
The drastically changed economic situation has forced the state government to heavily rely on market borrowings for running its day-to-day affairs. The state has borrowed ₹5,000 crore in April and ₹2,000 crore in May to tide over the fiscal crisis. It spends anything between ₹6,200 to ₹7,500 crore every month on payment of salaries, pensions of retired employees, social security pensions, wages to contractual employees, rural electrification and domestic subsidy, and payment of interests and debts.
Chief minister Manohar Lal Khattar, who also holds the finance portfolio, on Sunday said the increased borrowing limits allowed by the Centre would help them achieve the targets envisaged for various sectors which stood adversely impacted due to Covid-19 lockdown.
Additional chief secretary (ACS) finance TVSN Prasad said the state government was keyed up to embark on the reforms programme announced by the Union finance minister on Sunday. “The proposed reforms will also provide a window of opportunity for fundamental, structural and fiscal reforms which will improve the efficiency of four sectors along with the service delivery,” Prasad said. An ordinance will be promulgated by the state government to amend the Fiscal Responsibility and Budget Management (FRBM) Act to facilitate increased borrowings.
A part of the borrowings have been linked to specific reforms like implementation of ‘One nation one ration card’, district level and licensing reforms for ease of doing business, power sector reforms and reforms for strengthening urban local bodies.
Prasad said to provide adequate infrastructure and services in municipal areas, particularly to the area where economically weaker sections reside, it is important to update and strengthen tax recovery and user charge systems from economically affluent areas, and cross subsidise. “With this kind of reform, the urban local bodies will be able to develop capacity to deliver their mandate better, in the true spirit of the 74th amendment of the Constitution,” the ACS said.
Following the announcement by the Union finance minister, the central government on Sunday told the states that the additional debt will have to be balanced against the need for longterm debt sustainability. This is important that excess borrowing undertaken does not lead to adverse impacts in the future. In order to ensure sustainability, there is a need to increase future GSDP growth and revenues and reduce unproductive future expenditures, said a finance ministry communication.