Fiscal Responsibility and Budget Management rider stuns Telangana

Hyderabad: The fifth trance of the Rs 20-lakh crore economic stimulus package announced on Sunday by Union Minister for Finance Nirmala Sitharaman has left the state government totally disappointed.

The government feels that though the package was supposed to make various sectors self-reliant to face future crisis in case there was surge in Covid-19 cases, what has been rolled out is just an eyewash.

Even the announcement of increase in Fiscal Responsibility and Budget Management (FRBM) limit to 5 per cent of the state GSDP from the present 3 per cent would be of no help to the States as it comes with certain pre-conditions and would not help in overcoming the financial crisis, the government feels.

While Nirmala Sitharaman said that the decision to hike the FRBM limit was taken following request from the Chief Ministers during their video conference with Prime Minister Narendra Modi, to facilitate the States to avail more loans through market borrowings, the State government opines that it was of no use to them. Fulfilling the conditions linked to power reforms, boosting revenues of urban local bodies, ease of doing business and implementation of one nation one ration card at this stage was a difficult task.

Top officials of the state government said that linking the borrowing limit with some developmental parameters in the lockdown period was unwarranted. Increase in FRBM limit without any conditions was sought so that the States will have access to more loans from the open market and pump the money into developmental activities to ease the financial crisis early.

"At present, the Telangana State is raising Rs 23,400 crore at 3 per cent of the GSDP every year. The enhanced FRBM limit by 3.5 per cent without conditions will help the State to borrow only Rs 4,000 crore additionally. The State would have got Rs 12,000 crore additional borrowing limit if there were no conditions attached," a senior official said.

In the present crisis, Telangana requires at least Rs 20,000 to Rs 30,000 crore presuming lockdown would be lifted from June 1 to revive the state economy.

Echoing the government argument, Telanagana Planning Board Vice-Chairman B Vinod Kumar said that it is not correct to link the increased borrowing limits to the mandated reforms when States are reeling under the COVID crisis.

"After lifting of lockdown, it is expected there will be sharp spike in COVID19 cases as is the experience at global level. Under such circumstances, it would not be in fitness of things to place additional burden on States for undertaking critical reforms for providing liquidity support," he said.