The restrictions on state government borrowings could severely limit states’ ability to fight the twin shocks of the covid-19 pandemic and an unfolding economic crisis The economic crisis induced by the covid-19 pandemic has created a full-blown fiscal crisis for state governments in India, which have been at the frontline of the war to contain the pandemic.
As least six states have recently cut or deferred salaries of government employees as they struggle for resources to fight the twin shocks of a health emergency and an economic crisis.
More could follow in the coming days. The inadequacy of the centre’s Rs. 1.7 trillion package announced so far (a paltry 0.8 percent of India’s gross domestic product or GDP) has meant that states may