The fiscal gridlock

Budget constraints of states need immediate attention

India’s overall response to the outbreak of Covid-19 depends to a large extent on the state of state government finances, which usually do not get the attention they deserve. State governments are at the forefront of fighting the pandemic, which will materially add to their expenditure at a time when revenues are likely to decline significantly. For instance, goods and services tax (GST) collection in March slipped below the Rs 1 trillion mark and is likely to remain under pressure in the coming months. Further, states have not received the compensation for the shortfall in GST collection for several months