AS STATES scramble to raise funds to fight the coronavirus pandemic, a high-level panel appointed by the Maharashtra government has recommended that the Centre should borrow from the Reserve Bank of India (RBI) and “pass it on” to states to help them avoid a debt trap, The Indian Express has learnt.
The panel has contended that forcing states to borrow from capital markets could prove counterproductive, given that large-scale borrowing would be needed to cushion the economic impact of the lockdown that has already crossed 40 days.
Instead, the panel suggested that “RBI itself should raise loans… The Centre can then directly borrow from the bank and pass it on to states. This will allow borrowing at much lower interest rates”. The committee’s report, likely to be submitted to the state government Monday, also favours a graded lockdown exit strategy.
The 11-member expert committee, comprising senior serving and retired bureaucrats, was set up by the Maharashtra government early last month to recommend measures to revive the state’s economy, from agriculture and manufacturing to real estate and excise.
Heading into the third phase of the lockdown, the Union Ministry of Home Affairs has announced additional exemptions. But the Maharashtra panel has suggested an alternative approach “A negative list of activities that would remain prohibited should be prepared,” the panel suggests. A senior panel member said the suggestion was valid for other states, as well.
On an exit strategy, the committee is of the opinion that economic activity should resume as soon as possible in non-infected areas, with “clear demarcation of containment zones within hotspots”.
Just as the cities are the worst-hit, the panel has pointed out that the disruption in the demand supply chain had also impacted the state’s agricultural economy, which continues to be the source of livelihood for nearly 50 per cent of the population.
To avoid further losses, it has asked the government to ensure that all mandis run by Agriculture Produce Market Committees (APMCs) remain functional. Wary that farm loan credit from institutional lenders for the upcoming kharif season will dip sharply in the post COVID-19 scenario, the panel has asked the government to source additional funds from the National Bank for Agriculture and Rural Development (NABARD) to meet the shortfall.
Mass closures and losses to the government’s own treasury have also triggered a delay in the implementation of the farm loan waiver scheme. As per estimates, loan arrears of nearly 12 lakh eligible farmers are yet to be written-off. In this context, the panel has recommended that the state approach the RBI for rescheduling the arrears. “The state should bear the interest for such rescheduling,” the report states.
With Maharashtra estimating a loss in tax revenue to the tune of nearly Rs 50,000 crore during the lockdown, the panel has pushed for early resumption of real estate and infrastructure work, and wine shops, in urban belts. After GST, excise is the second biggest revenue grosser in the state.
Serving officials on the committee, with Additional Chief Secretary (Finance) Manoj Saunik as convenor, include Additional Chief Secretary (Planning) Debashish Chakravarty, Principal Secretary (Industries) B Venugopal Reddy, Principal Secretary (Finance Reforms) Rajagopal Devara, and Secretary (Agriculture) Eknath Dawle.
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