Relax fiscal deficit curbs to tackle economic slowdown, state FMs tell Sitharaman

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The states governments made a strong pitch for relaxing fiscal deficit limits under the Fiscal Responsibility and Budget Management Act to at least 4% of the GDP in the next financial year to tide over the severe economic slowdown. The proposal by Kerala’s Thomas Isaac and Bihar’s Sushil Modi found support among most state FMs who attended a pre-budget consultation meeting chaired by Union finance minister Nirmala Sitharaman.

“States will be forced to cut spending that this will have disastrous consequences when the economy is facing recession-like conditions,” Kerala finance minister Thomas Isaac said in the evening. He said states may be forced to get into cost-cutting mode, but assured that this will not be done at the cost of the welfare schemes.

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The Union budget presented by Sitharaman in July had pegged the fiscal deficit for the current financial year at 3.3%, but the actual number for the year could rise to 3.8%, the highest level allowed under the FRBM Act. Under the act, the government is bound the bring down the deficit to a manageable 3%.

At the customary pre-budget consultation meeting, the states urged the Union finance minister to release the GST compensation for November and December without delay. They said delay in payment has upset the state government’s spending plans. They also sought higher infrastructure spending to boost job creation and consumer demand in the economy.

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The meeting was attended by the finance ministers of 17 states, chief ministers of Haryana, Puducherry and Goa as well as deputy chief ministers of Delhi, Tamil Nadu, Bihar, Arunachal Pradesh and Tripura. Anurag Singh Thakur, minister of state for finance and corporate affairs, also took part in the deliberations.

The Union finance minister briefed the meeting on the steps taken by the Centre to boost economic growth. The representatives of the state governments put forward several suggestions on growth, investment and resource requirement. They suggested several ways to strengthen the coordinated efforts to make India a $5 trillion economy.

Sitharaman thanked the states and UTs for their suggestions and promised that the suggestions made in their pre-budget memorandums will be suitably considered in Budget 2020.