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Coronavirus pandemic | Impact on public finances to be significant: Fifteenth Finance Commission

It suggested that the projections of real GDP growth made before March 2020 need to be relooked at entirely and revised downward considerably.

April 24, 2020 / 07:35 PM IST

Though the magnitude of the impact of the coronavirus outbreak on public finances is still uncertain, it is undoubtedly going to have a telling effect, the Economic Advisory Council of the Fifteenth Finance Commission said on April 24.

"The council felt that the shortfall in tax and other revenues would be large due to subdued economic activities," the government said in a press statement.

The council advised the Commission that small-scale industries were cash starved even before the pandemic broke out and hence a support mechanism needs to be devised to help them with their cash flows.

In order to avoid non-performing assets and bankruptcies, as non-banking financial companies too have been affected, partial loan guarantee schemes could help the financial sector. "The Reserve Bank of India will have a key role in ensuring financial institutions are well capitalized," the statement said.

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The council said that different states will come out of the severity of the impact of the pandemic at different stages and so revival activities of different states would be at different stages. The council also said that though liquidity provisions for states have been made, ways of financing the additional deficits of states need to be looked into.

The council also unanimously suggested that the projections of real GDP growth made before March 2020 need to be relooked at entirely and revised downward considerably.

"Once the lockdown of the economy is released, the recovery can only be expected to be gradual, depending on the ability of the workforce to get back to work soon, restoration of supplies of intermediates, and cash flows, and of course the demand for output," the statement said.

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Moneycontrol News
first published: Apr 24, 2020 07:33 pm

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