State well within its limits in managing finances despite COVID-19: Harish
FRBM Act amendment sought in line with Centre’s recommendations, says Finance Ministerby Special Correspondent
Finance Minister T. Harish Rao has asserted that the State was well within the limits in managing its finances in spite of the setback suffered due to the outbreak of novel coronavirus (COVID-19) since the past few months.
The Minister said the State could register double digit economic growth, even while the country’s economic growth slipped to negative, as it has put in place prudent fiscal policies that are focused more on capital expenditure. “The enthusiastic response received to the bonds issued by the Telangana government is an indication of the prudent financial management system,” he said.
The Minister was replying to concerns expressed by Congress member Mallu Bhatti Vikramarka on the borrowings by the State during the discussion on the Bill amending the Telangana Fiscal Responsibility and Budget Management (FRBM) Act. The legislation allowed additional fiscal deficit of 2 % over and above the prescribed 3 % during the current fiscal and enhance the quantum of guarantees it could provide to State owned corporations from 90 % to 200 %.
Mr. Vikramarka said the State’s debt burden had risen to ₹ 2.38 lakh crore in the past six years and it was spending ₹ 23,841 crore on debt servicing every year. The passage of the Bill would result in steep escalation of debt burden and it would be difficult to manage such large debts in the coming days. “Debt servicing burden which is ₹ 23,841 crore at present is likely to go beyond ₹ 50,000 crore going by the indiscriminate borrowings by the government,” he said.
Mr. Harish Rao, however, countered Mr. Vikramarka and charged him with trying to mislead people with his calculations. The State’s net borrowings was at ₹ 1,54,557 crore after the State repaid ₹ 34,296 crore last fiscal. “Telangana is ranked 28th in the country in terms of debt-GDP ratio indicating the fiscal health of the State,” he said.
Explaining about the reasons for amending the FRBM Act, he said the Centre had allowed additional borrowing of ₹ 1,435 crore during the previous fiscal following the shortfall in the devolution of share of Central taxes as a one-time special dispensation. There was an unprecedented adverse impact of COVID-19 on State revenues and there was need to raise additional resources to meet the unforeseen expenditure in connection with relief operations to contain the pandemic.
The Central government had allowed additional borrowing up to 2 % of the GSDP over the above the normal limit of 3 % subject to carrying amendments to the State FRBM Act. To avail the allowed additional borrowing of ₹ 1,435 crore, it had become necessary to amend the Telangana FRBM Act suitably.
“The State however is not willing to accept the conditionalities imposed by the Centre even if it has impact on the State’s borrowings,” he asserted. Mr. Vikramarka and three other Congress members D. Sridhar Babu, K. Rajgopal Reddy and Danasari Anasuya staged a walk out in protest.