Nationalist Congress Party (NCP) president Sharad Pawar has made for a strong case for the additional grant of “untied nature” to the tune of Rs 1 lakh crore to the Maharashtra Government to tide over the financial crisis faced by it in the wake of Coronavirus crisis.
In one of the two letters that he wrote to Prime Minister Narendra Modi on Saturday, Pawar said: “It is imperative that in these testing times, the Government of India should offer suitable financial assistance to the states also. The Government of Maharashtra requests additional grants of untied nature to the tune of Rs 1 lakh crore for the financial year 2020-21”.
While appreciating the Centre for releasing packages for the poor, vulnerable financial institutions, businesses and others, Pawar urged the Centre to extend similar packages to the states.
“In the eventual recovery of Indian economy, the states will play a major role and if left out without any help, the states will not be in a position to supplement the required national government efforts. There should not be much a problem in the central government resorting to deficit financing. It is felt that borrowing by central government will be much more efficient and cheaper compared to borrowing by the states,” the NCP chief said.
Dwelling upon the Coronavirus-triggered situation in Maharashtra, Pawar said: “Mumbai is the hardest hit city in the Covid-19 outbreak and the prolonged lockdown conditions. It has severely impacted the economy of Maharashtra and may have detrimental consequences on Indian economy if not addressed urgently,” Pawar wrote.
Drawing the Prime Minister’s attention to the economic indicators and strategy needed to overcome the state crisis, the NCP chief said that the Maharashtra government had in its budget for 2020-21 projected receipts to the tune of Rs 3,47,000 crore. He said that since the economic activity might not pick up in the short run but improve in the long run, the shortfall in the revenue receipts woul+d Rs 1,40,000 crore. “This is around 40 per cent of the expected revenues and will leave a huge hole in the state finances,” he said.
“As per the present borrowing limits ( 3 per cent of GDP), the state can borrow up to Rs 92,000 crore, of which Rs 54,000 crore has been planned for meeting capital expenditure requirements for the year 2020-21. So it is clear that the state is going to face a shortfall of Rs 1,00,000 crore to sustain the projected expenditure,” Pawar said.
“Our strategy could be to enhance the Fiscal Responsibility and Budget Management (FRBM) borrowing limit and borrow more. However, covering entire shortfall only through borrowing will push the state towards debt trap. The other strategy could be cut public spending. However that would be counter-productive. In fact there will be additional expenditure requirements in the area of public health and medical education and other public services,” he said.
Among other things, the NCP chief urged the Centre to extend two-year moratorium on repayment of NSSF loan given by the Union government. “The State makes a repayment of Rs 10500 crore every year on account NSSF loan. The moratorium will help bridge the likely budgetary gap,” he said.
In another letter that he wrote to the Prime Minister, Pawar urged Modi to boost e-commerce and home-delivery to salvage the economy badly battered by the Covid-19 pandemic.
“Conventional shops and stores will be at a disadvantage in view of various restrictions and social distancing norms which may acquire permanence. This (promotion of e-commerce) will lead to creation of jobs and ease the problem of unemployment,” he said.
“All businesses unable to handle ‘social distancing’ will suffer heavily. Sizeable numbers of businesses are not likely to survive and many will lose jobs. They will need to be reskilled for alternate employment and alternative businesses will have to be actively promoted,” Pawar said.
Pawar said that opportunities lay in the field of tele-medicine, which was still in its infancy, but out of necessity remote visits will become more popular.
“While theaters and malls will continue to suffer, online entertainment platforms will expand and become more profitable, and similarly gyms will suffer but online workout sessions will be in great demand, though it will be difficult for beauty parlours and spas to survive,” the NCP chief said.
“Consequently, the household demand for health, wellness and beauty products will see a major spike. Paralelly, the commercial demand for such products may nosedive,” Pawar said.