Aditi Nayar writes: It is unlikely to do so in the coming quarter, although the uptick in vaccinations could impart a positive momentum to the economy.
The question is whether this will force the states to move on both the power sector reforms, which have proven challenging in the past, and the municipal reforms, so that their resource availability may be enhanced.
However, amidst all these concerns, yields on government security appear remarkably sanguine, as if they are patiently waiting for the central bank to absorb the extra sovereign borrowings in the primary or secondary market.
To avoid a substantial fiscal slippage at the state government level, a sizeable expenditure reduction or deferral is likely to be required, given that the borrowing limit set by the central government acts as a soft constraint to the size of the states’ fiscal deficits.
