Tighten your fiscal belt or sink: IMF ED Krishnamurthy Subramanian warns select states
New Delhi: States with relatively high revenue deficits such as Punjab, Himachal Pradesh, Kerala, West Bengal and Andhra Pradesh must take a leaf out of their healthy counterparts' book, Krishnamurthy V Subramanian has told ET, adding that the fiscal position in those states is a matter of concern even as the overall situation seems to have improved from the peak of the pandemic.
Likening their fiscal situation to «aamdani atthanni kharcha rupaiya» (spend twice than you earn), Executive Director of the International Monetary Fund (IMF) said «there is no option for these states but to implement some necessary, though not popular, decisions to tighten their fiscal belts by reducing unproductive expenditures.»
The fiscal situation of these states is like a leaky boat that can have only one outcome — «sink», he added.
«These states should look to learn from Uttar Pradesh, Maharashtra, Madhya Pradesh, Karnataka and Tamil Nadu, which together accounted for more than 40% of the combined capital outlay undertaken by all states during the last five years,» Subramanian said in an interview over phone and email from Washington.
«The states can also look to emulate Gujarat's Atmanirbhar Gujarat Policy for assistance to mega industries in sectors such as green energy ecosystem, mobility, capital equipment, metal and minerals, and gems and jewellery,» he added.
Subramanian, who had earlier served as India's Chief Economic Advisor, further said the states with large revenue deficits will find it tough to get out of debt as these are also the states where the growth rate of state GDP is not so high.
Conceptually, a revenue deficit implies that the revenue receipts of a state are not sufficient to meet its revenue expenditure,
