Prime Minister Narendra Modi said in a blog on Tuesday that India’s economic response to the Covid-19 pandemic did not follow a ‘one size fits all’ model, in line with the spirit of federalism.
“For a federal country of continental dimensions, finding policy instruments at the national level to promote reforms by State Governments is indeed challenging. But, we had faith in the robustness of our federal polity and we moved ahead in the spirit of Centre-State bhagidari (partnership),” the prime minister wrote in a blogpost, titled “Reforms by Conviction and Incentives”
He stated that despite the challenge of raising resources for public welfare amid a pandemic, the states “were able to raise an extra Rs 1.06 lakh crore in 2020-21.” This was thanks to the Centre’s Aatmanirbhar Bharat package, which increased borrowing for state governments, allowing an extra 2 per cent of GSDP. One per cent of this was made conditional on the implementation of certain economic reforms.
“This nudge for reform is rare in Indian public finance. This was a nudge, incentivising the states to adopt progressive policies to avail additional funds,” PM Modi wrote.
These reforms included the ‘One Nation One Ration Card’ policy that links the ration cards with the holder’s Aadhar number, which according to the prime minister, majorly benefited migrant workers. 17 states were granted additional borrowings amounting to Rs 37,600 crores for completing this reform.
Another reform required renewal of business-related licences under 7 Acts to be made automatic, online and non-discretionary on mere payment of fees to save MSEs from “Inspector Raj.” The blog details that 20 states have implemented the reform and were allowed additional borrowing of Rs 39,521 crores.
The third and fourth reforms included notifying floor rates of property tax, which was implemented by 11 states, and the introduction of Direct Benefit Transfer (DBT) in lieu of free electricity supply to farmers.
“Overall, 23 states availed of additional borrowings of Rs 1.06 lakh crores out of a potential of Rs 2.14 lakh crores. As a result, the aggregate borrowing permission granted to states for 2020-21 (conditional and unconditional) was 4.5% of the initially estimated GSDP,” the blog states.
PM Modi went on to state that the implementation of the reforms was a “pleasant departure from the past”, when “schemes and reforms remain un-operational often for years” for various reasons.