HYDERABAD: There is no immediate solution before the state government on how to wriggle out of the present financial crisis, arising out of the cancellation of big notes.
“We have no immediate plans to improve the finances against the backdrop of financial losses incurred to the exchequer in the aftermath of demonetisation of `500 and `1,000 currency notes,” sources in government told Express on Saturday.
The only ray of hope before the government is that the Centre might relax the borrowing limit of the states, which are affected by the cancellation of big notes. “When there was banking crisis in 2008, the government allowed the states to borrow more money by relaxing the norms. This time too, the Centre should take such steps to bail out the states,” sources explained. For this all the states should prevail upon the Centre, which may not be possible immediately,” sources felt.
The immediate step the state government can take is to reduce its spendings. “We cannot reduce certain expenses like salary, social security pensions and others,” an official said. Then, the state will reduce its capital expenditure on projects.
The next option before the state is to improve its tax base. “We will plug the loopholes in tax collections and see that taxes are collected 100 per cent,” sources said. Despite reducing its expenses and improve some tax revenue, the state’s economy will not revive in the next four to five months, sources told Express.
The public spending on real estate, white goods like refrigerators, LED TVs and high-end gadgets, luxury goods, consumer goods and even high-end four wheelers will reduce in the coming months resulting in less tax collections to the state.