Centre turning a blind eye to fiscal crisis, says Isaac

Published - January 31, 2017 11:39 pm IST - THIRUVANANTHAPURAM:

The Centre is turning a blind eye to the gravity of the post-demonetisation financial crisis to cut the assistance due to the States, Finance Minister T.M.Thomas Isaac has said.

Reacting to the Economic Survey released prior to the Union Budget on Wednesday, Dr.Isaac told reporters here that since Plan assistance to the States had come to a nought, the Centre should increase the allocation for Centrally sponsored schemes. The allocation for the Mahatma Gandhi National Rural Employment Guarantee Scheme should be doubled, he said.

The borrowing limit of States should be enhanced to at least 3.5% of the GSDP. The national growth rate was likely to plummet to 6% in 2017-18. The national income growth rate in 2016-17 had been pegged at 7.1% on the basis of rough estimates prepared by the CSO between April and October. Before demonetisation it had dipped to 7.1% from 7.6% and hence one could assume what would have been the growth rate between October and March. But the government had not even given a speculative rate, he said.

The crisis thrown up by demonetisation would continue for one more year and it would not wane by March as predicted in the Economic Survey, he said. The Gross Fixed Capital Formation that was pegged at 34% in 2014 had dipped to 29% and it would again go down to 23% in 2017-18. There would be a decline in investments too during the next financial year. If new investment pacts worth ₹ 3.4 lakh crore were inked during the three quarters prior to demonetisation, it slipped to ₹ 1.3 lakh crore in November and December.

The one novel aspect of the survey was the Universal Basic Insurance Scheme. The scheme aimed at depositing a minimum sum into the account of the poor. On implementing the scheme, the government would do away with the ration, employment guarantee scheme, pensions schemes, and other Centrally sponsored schemes and the funds used for such schemes would be disbursed as pension.

“While the State government is disbursing ₹ 12,000 a year to 40 lakh people, the proposed scheme does not go beyond the State pension scheme that exists along with other welfare measures,” he said.

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