With Punjab staring at 30 per cent shortfall in revenue receipts in 2020-21 fiscal year, the Council of Ministers on Wednesday gave in-principle approval to a slew of reforms to make the state eligible to avail additional borrowing of 1.5 per cent of Gross State Domestic Product (GSDP) amid Covid-19, as mandated by the Union government.
Amid mounting economic woes, the Punjab government has also decided to seek a fiscal stimulus of Rs 51,102 Crore from the Union government to help the state tide over the financial crisis triggered by the Covid pandemic and the prolonged lockdown.
A spokesperson of the Chief Minister’s Office said the Council took note of the fact that the lockdown has jeopardised the concerted efforts of the state government for achieving fiscal consolidation over the past three years.
While the Union government has considerable fiscal leverage, the state governments have extremely limited fiscal space, especially after the implementation of the Goods and Services Tax, it noted.
Punjab is one of the highest debt-stressed State in the general category states i.e. state’s outstanding debt to GSDP ratio is 40.7 per cent, which is significantly higher than States such as Maharashtra (17.9 per cent); Karnataka (18.2 per cent) Gujarat (20.2 per cent); Tamil Nadu (22.3 per cent), Andhra Pradesh (28.9 per cent) Kerala (30.9 per cent) and West Bengal (37.1 per cent).
A spokesperson said the stringent and proactive approach taken by the state government to check the spread of Covid have meant a loss of revenue and GSDP to the state.
As per the initial estimates presented by the Union finance minister, the state was expected to have a revenue shortfall of Rs 21,563 Crore, i.e. about 25 per cent of its Total Revenue Receipts (TRR) of Rs 88,004 Crore, in 2020-21.
However, with the lockdown extension till 31 May, a higher shortfall of about Rs 26,400 Crore, about 30 per cent of the state’s TRR is expected during 2020-21.
It is further estimated that there would be zero nominal growth of GSDP for the current year, and it is expected to remain at the same level of Rs 5,74,760 Crore in 2019-20. This is expected to lead to a shortfall of around Rs 25,578 crore or a 29.26 per cent dip in TRR.