Low government spends on social sector hurting the country; time to have a relook at priorities: Report

Mumbai: The Coronavirus outbreak that happened shows the cracks in the social sector, especially the healthcare sector, stated a report by SBI Ecowrap. The report stated the state governments will have to revise their budgets on the social sector, amid the outbreak, and the centre will have to support them.

SBI Ecowrap has appealed to the central government to spend and “not give misguided fiscal prudence”. The report clearly stated to escape from the current situation is possible through overbearing of fiscal policy. It stated, “Low spending on health and education and other social sectors is biting now and we have to take a hard look going forward as to what our priorities should be. The Centre must also support the States wholeheartedly in such an endeavour.”

The Covid-19 crisis will drive the state governments to have a massive revision in their state budgets. “The governments will have to step up expenditure, especially in the social sectors like health and sanitation, with a shortfall in tax collections. This will push the state fiscal deficit above 3 per cent in the coming year.”

The report, which was prepared by analysing 19 states, highlighted that the fiscal deficit projection for FY21 is at 2.04 per cent for these states and that looks difficult at this present scenario. This is mainly due to a shortfall in GST collection and an increase in health expenditure. It is estimated that the health expenditure as per cent of estimated GSDP in FY21, is not crossing even 2 per cent for any of these 19 states.

Low government spends on social sector hurting the country; time to have a relook at priorities: Report

Even if the states decide to allocate an additional expenditure of Rs 1.6 lakh crore. “All these could push the state fiscal deficit from budgeted 2.06 per cent to 3.5 per cent of GSDP unless backed up by capital expenditure cuts.” One should not forget, state governments like Delhi, Uttar Pradesh, Telangana, Odisha, Haryana, Maharashtra, Punjab and Himachal Pradesh are ramping up efforts to provide financial assistance to compensate businesses and people, particularly daily wagers. All this will just add to the deficit

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Free Press Journal