As the economy and related commercial activities get disrupted due to the surging coronavirus cases, there is an immediate need for the government to provide financial helps to the states in some form or the other. As the overall slowdown has made not just the sectors but also have taken a toll on the revenue of the government, even they are struggling to meet the excessive needs. The State Bank of India conducted research which states that the centre has the choice to directly transfer the full amount of Rs 54,000 crores from the SDRMF and NDRF.
The study is showing various means in which the central government can provide assistance to the states where they can easily transfer funds without making a huge cavity in their own reserves. The centre has a choice to transfer the whole amount which accounts to Rs 54,000 crores from State Disaster Response Fund (SDRMF) and National Disaster Response Fund (NDRF) states the latest SBI Ecowrap report.
Added, the government may also handover at least parts of the outstanding Rs 2.5 lakh crores through an extra hike in the WMA limits, supporting additional borrowing of states over Open Market Operations by Reserve Bank of India, and calming some of the conditional ties related with borrowing. The decision has been made by the Central Government to increase the borrowing limits of states by giving them extra resources of Rs 4.28 lakh crore. But as per the SBI research, it is suggested that only 8 states are in the situation to fulfil all the requirements and conditions stated by the government and can avail the 2 per cent of GSDP, the extra borrowing.
The results also specified that out of Rs 4.28 lakh crore, only Rs 3.13 lakh crore might be truly borrowed by the state governments in the current fiscal.
The State Bank of India explained in its report about the condition of states that they are weak as they have an inadequate resource of own tax revenue and the fund transfer to states will support the health and instant reimbursement to contractors for infrastructure labour. The decision will likely decrease the stretched working capital cycle and improve employment and demand. The centre had lately released GST Compensation for FY20 at Rs 1.65 lakh crores.
In the meantime, the coronavirus pandemic may lead to damage of Rs 3 lakh crores in Own Tax Revenue across the states. Similarly, an actual basic assumption of loss of a whole month’s revenue in components like State VAT, excise, stamps and registration are probable to bring down the revenue for Quarter 1 FY21 at around Rs 53,000 crore.
