Bailout for states

There is merit in Captain Amarinder Singh’s request to his counterparts in other states to strongly pursue with the PM a bailout package, with the governments being given the flexibility to make use of the revenue grant as per local conditions. The Punjab CM is correct in his assertion that special assistance is essential for handling the additional health and relief-related expenditure that a sustained fight against the Covid-19 pandemic demands. There would also be many takers for his other suggestion of deferment of the full report of the Finance Commission by a year, so that the requirements of the states for economic revival and relief as well as rehabilitation could be fully assessed, and adequately provided for.

Lockdown 2.0 ends on May 3, but strained for resources and struggling to garner any income, several states are desperate for economic activity to be back on track. Mamata Banerjee wants the lockdown to be quickly scaled back in stages: ‘lift 25 per cent in the week beginning May 4, reopen 50 per cent in the second week, and total rollback should happen in two weeks after May 4’. Captain Amarinder’s request to the Centre to allow sale of liquor, a critical source of earning for the state, may have been turned down, but it does point to the severity of the financial crisis.

A mega stimulus package is said to be in the works for the manufacturing and services sectors, but the delay in fine-tuning the contours on how to raise resources is making the industry more restive. India’s GDP growth, according to Fitch Ratings, is estimated to slip to 0.8 per cent for the current fiscal as compared to 4.9 per cent growth in the previous fiscal, before rebounding to 6.7 per cent in 2021-22. On the ground, prospects of a quick economic recovery appear weak. In this scenario, a collaborative Centre-state roadmap would make more sense.