As businesses and commercial activities continue to be in the stranglehold of COVID-19, the State’s own tax and non-tax revenue that has turned a trickle will further dry up pushing the government to the brink of a grave fiscal crisis.
The post COVID-19 fiscal crisis will be hard for the State to tackle. Even if the Centre decided to ease the lockdown curbs on May 3, the micro, small and medium enterprises (MSME) sector as well as other businesses are unlikely to get rid of the chill before Onam and that would directly impact the State’s revenue, Finance Department sources said.
The government would again have to avail itself of a loan for clearing the salary and pension bills in May. The commitment for clearing the salary bills roughly amount to ₹2,450 crore and ₹1,450 crore for pensions. The current treasury balance being less than ₹1,000 crore, the government would have to go for market borrowing for disbursing salary and pension.
The Reserve Bank of India (RBI) has already warned the State against major borrowings at exorbitant interest rates. Since the Centre has not cleared the request for raising the annual borrowing limit from the current 3% to 5%, exhausting the option in the first quarter of the current financial year would not be a wise option.
The State’s own tax revenue has been pegged at ₹5,100 crore, non-tax revenue at ₹1,000 crore and other Central transfers put together at about ₹1,500 crore. Till the business activities are revived and normalcy is resumed in the State, revenue streams such as Goods and Services Tax, Excise, motor vehicle tax and stamp duty will remain choked. The dribble from oil and other sources would be too inadequate, sources said.
The woes of traders handling perishables and legions of workers in various sectors who are looking for assistance need to be addressed.
Still, the decision to coax employees and teachers to share the burden for the time being and return it once the finances become stable is seen as a better option than the decision of the neighbouring States to go for pay cuts, sources said.
