- CM Baghel wants borrowing limit eased to 6% of GSDP
- Borrowing target of Rs 15,700 crore for FY21
- Chhattisgarh has debt burden 19.2 percent of GSDP
- All economic activities in the state stopped since lockdown
With the lockdown severely impacting revenue collection, the call for more liberal borrowing limits for states is getting louder. Chhattisgarh Chief Minister Bhupesh Baghel has asked the centre to relax the state's borrowing limit to 6% of GSDP this year and requested fiscal deficit of the state to be made equal to 5% of GSDP for raising more economic resources for operation and development activities of the state.
The chief minister has written a letter to Prime Minister Narendra Modi drawing his attention towards financial difficulties faced by Chhattisgarh due to the lockdown. He says in his letter that the state's revenue receipts are expected to fall this year, and the relaxation is necessary in the state's net borrowing limit and the fiscal deficit limit (3 per cent of the state's gross domestic product) as determined by the provisions of the Fiscal Responsibility and Budget Management Act.
He says that the Union Finance Ministry's consent to the state for borrowing Rs 5,375 crore from the market, which is equal to 50 percent of the state's net lending limit for the first nine months of this financial year, is insufficient to meet the expenditure in this period. For 2020-21, Chhattisgarh has a borrowing target of Rs 15,700 crore, and a fiscal deficit of Rs 11,500 crore or 3.2% of the GSDP.
Baghel says that Chhattisgarh has been adhering to financial discipline since the formation of the state, and currently has lowest debt burden (19.2 percent of GSDP) and lowest interest payments (7.4 percent of total revenue receipts) among states.
According to the 14th Finance Commission, the fiscal deficit targets of the states will be anchored to an annual limit of 3 per cent of Gross State Domestic Product (GSDP).The states will be eligible for flexibility of 0.25 per cent over and above this for any given year for which the borrowing limits are to be fixed if their debt-GSDP ratio is less than or equal to 25 per cent in the preceding year.
States will be further eligible for an additional borrowing limit of 0.25 per cent of GSDP in a given year for which the borrowing limits are to be fixed if the interest payments are less than or equal to 10 per cent of the revenue receipts in the preceding year.
In his letter to the Prime Minister, the chief minister further said that all economic activities in the state have been stopped since March 22 to prevent the spread of coronavirus. "The lockdown not only resulted in loss of revenue to the state but also badly affected the economically weaker section of the society, including daily wagers, labourers, small shopkeepers and rural households," he said.