Tamil Nadu Chief Minister Edappadi K. Palaniswami urged Prime Minister Narendra Modi to grant ₹9,000 crore to Tamil Nadu and allocate a special grant of ₹1 lakh crore to the State governments to combat the COVID-19 disease and to deal with its aftermath.
In a letter to the Prime Minister, Mr. Palaniswami reiterated that this should be in addition to the other forms of financial transfers to the States envisaged in the Union Budget and can be financed by the Government of India borrowing from the Reserve Bank of India.
He wrote: “I request that the Government of India, in addition to permitting the additional borrowing by State Governments, should provide an aggregate amount of at least ₹1 lakh crore as a special grant to the State Governments to combat the COVID-19 virus and its aftermath. This needs to be in addition to the other forms of financial transfers to the States envisaged in the Union Budget and can be financed by the Government of India borrowing from the Reserve Bank of India.”
Mr. Palaniswami suggested that the funds can be distributed in proportion to the size of each state’s GSDP (Gross State Domestic Product) to the national Gross Domestic Product.
“The expenditure out of this grant will also pump prime the economy and lead to its revival. I request that Tamil Nadu may be given a grant of ₹9000 crore under this special dispension,” he said.
While thanking the Prime Minister for announcing measures as part of Pradhan Mantri Graib Kalyan Yojana and liquidity and interest rate reduction measures announced by the Reserve Bank of India, Mr. Palaniswami pointed out that the responsibility of ensuring the lockdown in a strict manner and the welfare of the poor and the vulnerable falls on the State governments.
Mr. Palaniswami said that more relief measures would be needed in the coming days as States would incur expenditure to ramp up the availability of health infrastructure and medical supplies.
“Eventually, measures would also have to be taken to revive economic growth, assist various sectors to return to their growth trajectory and to stimulate consumption and investment demand. All governments will suffer substantial reductions in tax and revenue receipts and it would not be possible to step up revenue raising for a while. However, the expenditure needs and responsibilities will not wait,” he said.
Arguing that unconventional measures are required to revive the economy, Tamil Nadu Chief Minister Mr. Palaniswami said that conventional economic doctrines and dogmas will need to be set aside temporarily.
In his letter on March 25 to Prime Minister Narendra Modi, Chief Minister Palaniswami urged him to relax, as a one-time measure, the fiscal deficit limits of 3 percent of GSDP for 2019-2020 and 2020-2021 and permit additional borrowing of 33 percent above the level for the fiscal year 2019-20 may be allowed for 2020-21 to enable States to meet the additional expenditure requirements.
“While this will certainly help the States to immediately incur expenditure, States naturally have a limitation on how much they can borrow in the markets and will be crippled by massive repayment obligations if they borrow too much. But the onus on reviving the economy by fuelling consumption and investment falls on the Governments at this time,” he underlined.
