With revenue sources drying up and fiscal position turning precarious, disbursal of salary and treasury outgo for committed expenditure may get derailed in May.
On borrowing ₹6,000 crore in the first week of April to meet its routine commitments and the additional funds needed for virus containment, the Reserve Bank of India is understood to have cautioned the government against opting for borrowing substantial sums since the interest rate would surge beyond 9%. This has prompted the government to defer borrowings till there was a turnaround in the economy and the market conditions settle.
Since the Centre has refused to lift the cap on the annual borrowing limit, the government was forced to wait till April first week for floating bonds to source funds to meet its urgent needs.
Revenue loss
The revenue loss for April alone has been pegged at about ₹10,000 crore and it is likely to deepen further in the coming months. The political resistance put up by the Opposition United Democratic Front against a ‘Salary Challenge’ mooted for employees and teachers, the alleged indifference of the Centre in heeding to the repeated requests for additional assistance to meet the exigency triggered by the virus outbreak and also releasing the Goods and Services Tax compensation and other arrears due to the State have all compounded the fiscal woes of the government.
The Salary Challenge was mooted as a panacea to avert a salary cut which Telangana and Maharashtra had announced earlier, but the lukewarm response of the employees, even to donate a month’s salary in instalments, would push the government to go in for harsh decisions, including a pay cut.
Austerity measures
A slew of austerity measures are also on the anvil for reducing the administrative cost to the bare minimum. This involves containing splurge and re-prioritisation of projects of local bodies and various departments, sources said.
In spite of the resource crunch, Finance Minister T.M. Thomas Isaac has directed to lift the treasury payment curbs on bills of local bodies from Friday.
Curbs on payment of kerosene subsidy for fishworkers, stipend for students, compensation up to ₹1 crore for land acquired by the government, medical reimbursement and payments from the Chief Minister’s Distress Relief Fund too will go from Friday. This is to honour the commitment Dr. Isaac had given to make such payments from April, sources said.
