Despite the challenges posed by the COVID-19 pandemic and in the context of a financial crisis seen around the world, Indian states were able to borrow much more in 2020-2021 and were able to raise an additional Rs 1.06 lakh crore during the period. 2020-21. This significant increase in the availability of resources, said Prime Minister Narendra Modi, was made possible by a “bhagidari center-state” approach.
The Covid-19 pandemic has come with a whole new set of policy-making challenges for governments around the world. India is no exception. Mobilizing enough resources for public welfare while ensuring sustainability is proving to be one of the biggest challenges, Modi said Tuesday in a blog post titled “Reforms by Conviction and Incentives.”
He said that in formulating the country’s economic response to the Covid-19 pandemic, the central government wanted to ensure that our solutions did not follow a ‘one size fits all’ model.
“For a federal country with continental dimensions, finding political instruments at the national level to promote reforms by state governments is indeed a challenge. , read PM Modi’s blog.
He said that in May 2020, under the Aatmanirbhar Bharat program, the Indian government announced that state governments would be allowed to borrow more for 2020-2021. An additional 2 percent of the GSDP was allowed, of which 1 percent was contingent on the implementation of certain economic reforms.
He added that this reform boost is rare in India’s public finances, adding that it was a boost, prompting states to adopt progressive policies to secure additional funds. The results of this exercise are not only encouraging but also go against the idea that there are few takers for sound economic policies, Prime Minister Modi said.
He said in his blog that the four reforms to which additional borrowing was linked (with 0.25% of GDP tied to each) had two characteristics. First, each of the reforms was linked to improving the living comfort of the public and in particular the poor, the vulnerable and the middle class. Second, they have also promoted fiscal sustainability, he said.
He mentioned that the first reform under the “One Nation, One Ration Card” policy required state governments to ensure that all state ration cards under the National Law on Food Security (NFSA) carry the Aadhaar number of all family members and that all Fair Price stores had electronic point of sale devices.
The main advantage is that migrant workers can withdraw their food ration from anywhere in the country, Prime Minister Modi said, adding that besides these benefits for citizens, there is the financial benefit of disposal. fake cards and duplicate members. 17 states have completed the reform and obtained additional loans amounting to Rs 37,600 crore, Prime Minister Modi said on his blog.
He said the second reform, aimed at improving the ease of doing business, requires states to ensure that the renewal of business licenses under 7 laws is made automatic, online and non-discretionary on the fly. payment of fees.
“Another requirement was the implementation of a computerized random inspection system and notice of inspection to reduce harassment and corruption under 12 other laws. This reform (covering 19 laws) is particularly useful micro and small enterprises, which suffer the most from the burden of “inspector raj.” It also promotes a better investment climate, greater investment and faster growth. 20 states have completed this reform and have been authorized to borrow an additional 39,521 crore rupees, “the blog read.
Prime Minister Modi said the 15th Finance Committee and several academics have stressed the critical importance of sound property taxation. The third reform required states to notify the floor rates of property tax and water and sanitation charges, in accordance with indicative values of stamp duties for real estate transactions and running costs, respectively, in urban areas. . This would provide better quality of services to the urban poor and the middle class, support better infrastructure and stimulate growth, the prime minister said.
He said the property tax is also progressive in its incidence and therefore the urban poor would benefit the most, adding that this reform also benefits municipal staff who often face late payment of wages. 11 states have completed these reforms and obtained an additional loan of 15,957 crore rupees, Prime Minister Modi said on his blog.
Stating that the fourth reform was the introduction of Direct Benefit Transfer (DBT) instead of providing free electricity to farmers, he said the requirement was the formulation of a whole-of-the-world program. State with actual implementation in a district on a pilot basis by the end of the year. .
He said an additional 0.15 percent borrowing from the GSDP was linked to this. A component has also been planned for the reduction of technical and commercial losses and another for the reduction of the gap between income and costs (0.05% of the GSDP for each). This improves the finances of distribution companies, promotes water and energy conservation and improves the quality of service through better financial and technical performance.
The Prime Minister asserted that 13 states have implemented at least one component, while 6 states have implemented the DBT component. As a result, Rs. 13,201 crore of additional borrowing has been authorized, he added.
Overall, 23 states used additional borrowing of Rs. 1.06 lakh crore out of a potential Rs. 2.14 lakh crore. As a result, the full borrowing authority granted to states for 2020- 2021 (conditional and unconditional) was 4.5% of the initially estimated GSDP, read PM Modi’s blog.
He added: “For a great nation with complex challenges like ours, it has been a unique experience. We have often seen that for various reasons, programs and reforms often go unheeded for years. It was a pleasant start. from the past when the Center and States came together to roll out pro-public reforms in a short period of time amid the pandemic. ”
Prime Minister Modi stressed that this was made possible through the approach of the Center of Sabka Saath, Sabka Vikas and Sabka Vishwas. He said officials who worked on these reforms suggest that without this incentive for additional funds, the enactment of these policies would have taken years. India has seen a pattern of “stealth and forced reforms,” Prime Minister Modi said.
“This is a new model of ‘reforms by conviction and incentive.’ I am grateful to all the states that have taken the initiative to introduce these policies in the midst of difficult times for the well-being of their citizens. . We will continue to work together for rapid progress of 130 Indian crore, “read the last lines of PM Modi’s blog.
Reforms by conviction and incentives … my @LinkedIn publication on innovative policymaking in the era of COVID-19, fueled by the spirit of the state of the Bhagidari Center. https://t.co/ac0jhAqluT
– Narendra Modi (@narendramodi) June 22, 2021
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