State finances stressed, need greater room to incur additional costs due to COVID-19: N K Singh

Singh said in the longer run, the government should look at removing clutter in the Disaster Management Act and Epidemic Act. It also needs to have a relook at the demarcation of functions of the Centre and states which was done when the Constitution was framed in 1951, he said.

Finances of the states are stressed on account of the COVID-19 pandemic and some fiscal norms should be relaxed to allow them greater room for incurring additional expenditure, 15th Finance Commission Chairman N K Singh said on Wednesday. He said there is a need to revisit the entire issue of macroeconomic stability in the current situation as the path of the pandemic is unknown and the consequences on the economy remain extremely problematic.     "Finances of the states are stressed, central government's own revenues have fallen. There are issues of fiscal pressure. I do believe that this is the time of combination, this is the time when I believe some of the basic tenets of the fiscal norms need to be suitably relaxed. "This is the time states need greater room to be able to meet the initial obligations on account of this pandemic," Singh said in an address to the students of IIM Bangalore.     The central government has already increased the borrowing limit of states to 5 per cent of GSDP (Gross State Domestic Product) from 3 per cent that was already available. This would make available an additional Rs 4.28 lakh crore resources. States so far had a net borrowing ceiling of Rs 6.41 lakh crore based on 3 per cent of GSDP.     However, part of the increased borrowing limit would be linked to specific reforms -- universalisation of 'one nation one ration card', ease of doing business, power distribution and urban local body revenues.     Singh said in the longer run, the government should look at removing clutter in the Disaster Management Act and Epidemic Act. It also needs to have a relook at the demarcation of functions of the Centre and states which was done when the Constitution was framed in 1951, he said.     "When it comes to (managing) pandemic, issue that arises is, is it the function of the state or the Centre? Now, there is Disaster Management Act, 2005. There is Epidemic (Diseases) Act, which is there much before the Constitution was drafted. "So a lot of what is being done ... for management of pandemic is use of both Epidemic Act and Disaster Management Act. There is some incongruity in the definition (as) to whom the centrality of the functions belong," he said. With regard to allocation of functions between the Centre and states as specified in the Seventh Schedule of the Constitution, Singh said "any distribution of functions were made when the Constitution was written in 1951, and that demarcation requires fundamental rethink." PTI JD ABMABM

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)