Restrictions to impact tax collection, Plan expenditure

Curbs on financial transactions imposed by the Centre are likely to impact tax collection and Plan expenditure in the State.

Finance Department sources told The Hindu here that the Centre has not yet devolved the latest component of the Union Finance Commission award of Rs.721 crore due to the State, and that it would add to the fiscal deficit burden.

The government would be forced to draw funds from other sources to meet its immediate requirements. Given the limited borrowing capacity of the State, the delay in devolution of funds would push the State to the brink of a crisis, sources said.

The restrictions have come at a time when the government is trying to steer clear of the hassles thrown up by the dip in returns from the Gulf countries, crisis in the plantation sector and the combined impact from other similar factors.

The government does not have too many options on hand to raise resources to set off the unexpected dip in income.

Unless compensated by the Centre, the revenue deficit would go up and the calculations to bring the economy back to rails may go awry. The current situation does not offer much hope to look forward in terms of an immediate assistance.


The confusion and uncertainty over the restrictions in financial transactions have cast its shadow on all businesses within a very short span. Being a consumer State, the steep fall in business would directly reflect on the tax collection that was gradually picking up from a meagre 7 per cent at the start of the financial year to about 15 per cent at present, but it is feared to tumble again. This would also have a direct bearing on the State’s revenue, sources said.

The limits fixed in bank transactions are likely to take its toll on Plan expenditure and all development initiatives of the local governments. The government is yet to get a directive from the Centre on managing the treasury transactions. Local governments would have to wait for a clear directive to get payments from the treasury for the bills submitted and that would eventually put a brake on their development ventures and spending too, sources said.

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Printable version | Mar 29, 2020 2:26:43 PM |

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