Telangana Pushes for 4% Deficit Cap, Loan Grants

ECONOMY
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Author Ishaan Verma | Published :
Telangana Pushes for 4% Deficit Cap, Loan Grants
Overview

Telangana's Deputy Chief Minister has urged the Union government to raise the fiscal deficit target for states to 4% of GSDP. The state requires increased resources for public infrastructure and capital investment to drive economic growth. Additional requests include converting interest-free loans into grants and doubling assistance.

Push for Higher Deficit Target

Telangana Deputy Chief Minister Mallu Bhatti Vikramarka has urged the central government to increase states' annual fiscal deficit target to at least 4% of GSDP. This appeal was made during a pre-budget meeting in the national capital, seeking to unlock more resources for public infrastructure.

Boosting Capital Investment

The state aims to raise its capital investment rate to 50% of GSDP, a move deemed critical for contributing to the 'Viksit Bharat' vision and achieving a $3 trillion economy by 2047. Increased fiscal space is seen as essential for these developmental goals.

Convert Loans to Grants

Beyond the deficit target, Vikramarka called for converting the 50-year interest-free loans provided to states into grants. He also requested a doubling of the quantum of financial assistance to states.

Concerns Over Tax Devolution

Telangana highlighted issues with tax devolution, citing the central government's increased reliance on cesses and surcharges. This practice, the state contends, reduces the actual share of revenue transferred to states despite Finance Commission recommendations.

Grant Shortfalls Impact

The Deputy CM pointed out that the Union government's deviation from tradition by not accepting recommendations from the 15th Finance Commission resulted in Telangana losing ₹2,362 crore in state-specific grants and ₹3,024 crore in sector-specific grants.

GST Revenue Mechanism

The state also flagged potential revenue shortfalls from GST rate reductions and requested the establishment of a suitable mechanism to compensate states for any such losses.