How Not To Deal With A Downturn

The Indian Express     17th September 2021     Save    
QEP Pocket Notes

Context: Cutting down funds to states, monetising assets could aggravate the crisis.

Criticisms against government’s pandemic recovery time policies

  • Monetisation is hot-selling of national assets:
    • National Monetisation Pipeline has nothing to do with infrastructure development: It is, instead, a cover-up of the massive resource crunch the country is staring at.
    • Disinvestment of profitable Navratna companies will result in loss of dividend, a major source of income for the Centre.
    • Centre is now advising panchayats to find ways to monetise their properties. Panchayats are being asked to sell their capital assets and use the money for revenue expenditure.
  • Fiscal federalism at threat – State finances in crisis: States begging for resources does not augur well for cooperative or fiscal federalism. With GST and changes in Finance Commission resource allocation criteria, states are at great loss. Key concerns include-
    • Biases in resource allocation – Case study on Kerala: Kerala was getting about 3.92% from the divisible pool in 1970s and 1980s. It came down to 2.34% and 2.45% as per 13th and 14th Finance Commission. Now, 15th Finance Commission reduced it to 1.92%.
    • Shrinkage of divisible pool: With gradual rise in Cesses and Surcharges and huge tax exemptions to big corporate houses. Shareable resources with the Centre came down from Rs.6.8 lakh crore in 2019-20 to Rs 5.5 lakh crore in 2020-21.
    • Stopping of guaranteed GST Compensation: Which is to end by 2022, will further worsen state’s finances.

Conclusion: Developing basic infrastructure and the production sector is the only way to face an economic crisis. We need massive public investment that will help people to form cooperatives and collectives in agriculture and industrial production.

QEP Pocket Notes