Centre responsible for economy collapse; must borrow from World Bank to help states: Saamana

In an editorial, Saamana said the Centre must give financial aid to states to help them tide over the economic crisis as states fill up the coffers of the central government

Maharashtra’s ruling Shiv Sena has asked the Centre to take a loan from the World Bank to help states while blaming it for the country’s “collapsed” economy, mishandling the Covid-19 lockdown and causing “chaos and uncertainty”. In an editorial in its mouthpiece Saamana, the Shiv Sena said the Centre must give financial aid to states to help them tide over the economic crisis as states fill up the coffers of the central government.

“The Centre is responsible for the collapse of the economy. Fatal experiments like demonetisation [withdrawal of ₹500 and ₹1,000 banknotes in 2016] are responsible for the chaos in the economy. Without any preparation [a countrywide] lockdown was announced, and while doing so there was no coordination...,” the editorial said.

It added Union health minister Harsh Vardhan said on March 13 there is no medical emergency in the country. “On March 22, Prime Minister called for [voluntary] Janata curfew [for social distancing]. On March 24, after a notice of only four hours, a 21-day strict lockdown was announced. The chaos and uncertainty that started then is still going on. Never has there been so much chaos.”

The editorial said states like Punjab, Delhi and West Bengal have sought financial assistance from the Centre. It added revenues of states such as Uttar Pradesh and Bihar have reduced by 75%. The editorial asked the Centre to take a “hefty loan” from the World Bank and distribute money to the states while calling it the “only alternative”. It noted the Centre announced a relief package of ₹20 lakh crore during the lockdown and added “it is a mystery where the money has gone”.

The editorial said at least 22% of the Centre’s revenue comes from Mumbai, but it is not ready to help states. “Maharashtra, Gujarat, Uttar Pradesh, Tamil Nadu and Delhi have borne the maximum brunt of Covid-19 and suffered losses worth ₹14.4 lakh crore,” the editorial said.

The Centre late last month offered the states two borrowing options to plug a shortfall in their Goods and Services Tax (GST) revenue, estimated at ₹2.35 lakh crore in the current financial year, as the Covid-19 pandemic has taken a toll on the economy. The states can borrow ₹97,000 crore at a reasonable interest rate and repay the amount from the cess charged on luxury and sin goods like liquor after the GST regime completes five years of implementation in June 2022. The second option is for the states to borrow the entire ₹2.35 lakh crore in consultation with the central bank. Some states have insisted that the Centre borrow the money instead and compensate the states for the shortfall.