States seek fiscal stimulus to ease demonetisation woes

States today demanded fiscal stimulus from Centre to deal with shortfall in tax revenues post demonetisation as well as allowing them to borrow more funds from the market to boost spending on infrastructure.
At their pre-budget meeting with Union Finance Minister Arun Jaitley, states demanded higher outlay for rural employment generation programmes, revival of National Rural Drinking Water Programme and launching of new schemes for urban poor.
They also sought more funds for agriculture, irrigation, unorganised, MSME and service sectors, among others.
"Common suggestions made during the meeting included more focus on relaxing FRBM limit in case of states for raising their borrowing capacity by raising it by 1 per cent or at least by 0.5 per cent, expansion of bank branches in most remote areas of the country and expressed need for giving fiscal stimulus," Finance Ministry said in a statement issued after the meeting.

The meeting was also marked by West Bengal Finance Minister Amit Mitra staging an angry walkout, saying there was "financial emergency" and "political environment of fear" in the country. This came in the backdrop of CBI arresting his party's leader in the Lok Sabha Sudip Bandyopadhyay last night for his alleged involvement in a ponzi scheme.
States also demanded certainty about devolution of funds well in advance and said any changes should be made with adequate notice so that they can plan accordingly and make effective use of funds.

They also wanted limit of NABARD refinancing of cooperative bank loans to farmers be raised for extending affordable credit to them, higher MSPs be declared for pulses and coarse cereals and timely release of funds for centrally sponsored schemes such as Sarv Shiksha Abhiyan and Madhyamik Shiksha Abhiyan, among others.

Jaitley, on his part, said various steps taken by the Centre in recent past to unearth black money will help in curbing corruption and making the economy more cleaner, transparent and efficient.
The world economy is passing through a difficult phase and is quite fragile, he said, adding macro and micro indicators are quite strong and India is able to emerge as one of the fastest growing economies in the world.
Jaitley said multifarious reforms initiated by the Central government in recent past would be taken forward in the coming months and urged the states to work together for putting India on the path of higher growth.

"It was suggested that there is need to move from fiscal federalism to resource federalism," the statement added.