WHY THE STATES ARE BROKE
“The states have so far borrowed only 14 per cent of the limit authorised. They are still asking for a special increase. The Centre has decided to accede to the request of the states to increase the borrowing limit from 3 to 5 per cent for 2020-21”
NIRMALA SITHARAMAN Union finance minister
“It is clear that states will have to take care of themselves. I have found ways to improve state finances in the past and will do it again. It’s a challenging task, but it has to be done if the Centre is indifferent”
ASHOK GEHLOT Rajasthan chief minister
The pandemic figures till mid-June show that Maharashtra, Tamil Nadu, Delhi, Gujarat and Uttar Pradesh are the five states with the largest number of confirmed COVID-19 cases in India. Together, these states also account for 42 per cent of India’s Gross Domestic Product. Thanks to the coronavirus outbreak and the ensuing lockdown, these states are likely to report losses amounting to a staggering Rs 14.4 lakh crore, or 48 per cent of the total losses states might incur in 2020-21, claims a report by a research team of the State Bank of India.
That is not to say the rest of India is faring much better. The report pegs the total loss of all states at Rs 30.3 lakh crore—or 13.5 per cent of their combined GSDP. Most Indian states are dealing with huge fiscal constraints as they fight the Covid pandemic. With lost livelihoods becoming as big an issue as the battle to save lives, states have had to step up humanitarian expenditure in the form of cash handouts and free/ subsidised food. The return of migrant workers compounded the problem, with transport, quarantine and rehabilitation adding to the spend. And now that they have to find ways to stimulate the economy, costs are expected to balloon.
The combined fiscal deficit of all states, budgeted at 2.6 per cent of the GSDP for FY21, is now set to widen to 4.5 per cent, estimates a
