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Central government’s response to the COVID-19 pandemic (Apr 13-20, 2020)

As of April 20, 2020, there are 17,265 confirmed cases of COVID-19 in India.  Since April 13, 8,113 new cases have been registered.  Out of the confirmed cases so far, 2,547 patients have been cured/discharged and 543 have died.  As the spread of COVID-19 has increased across India, the central government has continued to announce several policy decisions to contain the spread, and support citizens and businesses who are being affected by the pandemic.  In this blog post, we summarise some of the key measures taken by the central government in this regard between April 13 and April 20, 2020. 

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Source: Ministry of Health and Family Welfare, PRS.

Lockdown

Lockdown to remain in force until May 3, 2020

The lockdown has been extended until May 3, 2020 with certain relaxations taking force as of April 20, 2020.  Activities that continue to remain prohibited after April 20, 2020 include: (i) all international and domestic travel except for healthcare workers and security purposes, (ii) passenger travel in trains, buses and taxis, (iii) industrial activities and hospitality services (other than those permitted), (iv) all educational institutions, and (v) all religious gatherings.  Activities that are permitted after April 20, 2020 include: (i) all health services such as hospitals, clinics, and vets, (ii) agricultural operations, fisheries, and plantations, (iii) public utilities including provision of LPG and postal services, (iv) financial establishments such as non-banking financial institutions, banks and ATMs, (v) e-commerce for essential goods only, and (vi) industrial activities such as oil and gas refineries and manufacturing.  Persons who do not follow the lockdown may be punishable with imprisonment up to one year and a fine, or both.  States and union territories may not dilute these lockdown guidelines specified by the central government.  However, they may implement stricter measures.

Certain areas within hotspots demarcated as containment zones

Hotspots refer to areas where there are large COVID-19 outbreaks or clusters with a significant spread of COVID-19.  Within hotspots, certain areas may be demarcated as containment zones by the state or district administrations.  There will be a strict perimeter control in the containment zones.  Inward and outward movement from the containment zones will be restricted except for essential services such as medical emergencies, and law and order related activities. 

Movement of stranded migrant labour

The Ministry of Home Affairs has permitted the movement of stranded migrant labour within the state in which they are stranded for work in activities permitted after the relaxation of the lockdown on April 20, 2020.  These activities include industrial work, manufacturing, and construction.  State governments may undertake skill mapping of migrant labourers and transport them to worksites if they are asymptomatic and willing to work. Movement of migrant labour across state borders continues to be prohibited. 

Financial Measures

RBI announced additional measures to combat economic situation due to COVID-19

The International Monetary Fund’s Economic Counsellor has estimated the cumulative loss over 2020 and 2021 to global GDP due to the global economic lockdown to be around 9 trillion dollars.  To combat the economic impact of COVID-19 in India, the Reserve Bank of India (RBI) has announced several additional measures.  These include: (i) reduction in reverse repo rate from 4% to 3.75%, (ii) targeted long-term repo operations for an aggregate amount of Rs 50,000 crore, (iii) refinancing of financial institutions such as National Bank for Agriculture and Rural Development, Small Industries Development Bank of India, and National Housing Bank for a total amount of Rs 50,000 crore to enable them to meet the financing needs of sectors they cater to.

Dividend payments by banks 

In light of the economic impact of COVID-19, the RBI announced that banks shall not make any further dividend payouts from the profits pertaining to the financial year which ended on March 31, 2020.  According to RBI, this will allow banks to conserve capital to retain their capacity to support the economy and absorb losses. This restriction will be reassessed based on the financial results of banks for the quarter ending in on September 30, 2020.

Short term credit to states 

RBI has announced an increase in the Ways and Means Advances (WMA) limits for states and UTs. WMA limits refer to temporary loans given by the RBI to state governments. The WMA limit has been increased by 60% from the limit as on March 31, 2020, for all states and UTs. The revised limits will be in force between April 1 and September 30, 2020.

Travel and export

Travel restrictions to continue

Since the lockdown has been extended until May 3, 2020, domestic and international travel remains prohibited.  All domestic and international flights will not function until May 3, 2020.  Further, the Director General of Civil Aviation has specified that airlines should not start allowing ticket bookings from May 4, 2020 onwards as there has been no clearance for such activities to commence.  All passenger trains will also remain cancelled until May 3, 2020.  There will be a full refund for flight tickets purchased during the lockdown period for travel before May 3, 2020.  Further, there will be a full refund for tickets booked for trains that were cancelled during the lockdown and cancellation of advance bookings of tickets for trains not yet cancelled.  

Export of paracetamol

The Ministry of Commerce and Industry has specified that formulations made of paracetamol may be freely exported from April 17, 2020 onwards.  However, the export of paracetamol active pharmaceutical ingredients (APIs) will continue to be restricted. On March 3, 2020, the export of both formulations made of paracetamol and paracetamol APIs was restricted.

For more information on the spread of COVID-19 and the central and state government response to the pandemic, please see here.

 

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Impact of Lockdown on Government Revenue

To mitigate the spread of coronavirus in India, the central government imposed a nation-wide lockdown on March 25, 2020.  The lockdown necessitated the suspension of all economic activities, except the ones classified as ‘essential’ from time to time, and the ones that can be carried out from home.  As a result, all economic activities which require persons to travel or work outside home, such as manufacturing of non-essential goods and construction, have stopped since then.  While this has resulted in a loss of income for many individuals and businesses, the ongoing 40-day lockdown is also going to severely impact the revenue of the central and state governments, primarily the tax revenue that they would have generated from all such economic activities.  

This note discusses the possible effect of the lockdown on the revenue of the central and state governments in 2020-21.  At this stage, the effect of the pandemic and the lockdown are difficult to estimate.  We do not know whether there will be partial restrictions when the current lockdown ends on 3rd May or the possibility of further action during the year.  Therefore, this note can be used as a first estimate to compute the impact under various scenarios.  For example, a reader who believes that the effect on GDP growth would be different than the IMF’s estimate used below can extrapolate the numbers to fit his assumptions.

The central government and most of the state governments passed their budget for the financial year 2020-21 during February-March 2020, before the lockdown.  The central government estimated a 10% growth in the country’s nominal GDP in 2020-21, and more than half of the states estimate their nominal GSDP growth rate in the range of 8%-13%.  Due to the unforeseen impact of the lockdown on the economy, the 2020-21 GDP growth rates are expected to be lower than these estimates.  As a result, the tax revenue that the central and state governments will be able to generate are expected to be much lower than the budgeted estimates, during the period of lockdown.

Centre’s revenue

Table 1 shows the revenue expected by the central government from various sources in 2020-21.  73% of the revenue (Rs 16.36 lakh crore) is expected to come through taxes.   Because of the impact of lockdown, the actual tax revenue realised at the end of the year could be much lower, depending on how much the nominal GDP growth in 2020-21 gets affected.  To estimate the impact on tax revenue, we assume that the tax-GDP ratio (i.e. an estimate of the tax generated out of each unit of economic activity) in 2020-21 will remain the same as the budget estimate.   This may be a conservative estimate of loss of revenue due to lockdown as many permitted activities such as agriculture, government services and essential services have zero or lower-than-average taxes.

Based on this assumption, a 1%-point fall in the nominal GDP growth rate could decrease centre’s net tax revenue by about Rs 15,000 crore in 2020-21, i.e. 0.7% of its total revenue.  The IMF has projected GDP growth for 2020-21 at 1.9%; given the inflation target of 4%, nominal GDP growth could be about 6%.  In that scenario where the nominal GDP growth falls by 4% point from 10% to 6% in 2020-21, net tax revenue loss could be about Rs 60,000 crore (2.7% of total revenue).  As mentioned above, the tax-GDP ratio would likely be lower than the budget estimate because of the type of activities permitted during the lockdown.   This would increase the adverse impact on tax revenue.

There is a further assumption being made above regarding tax-GDP.  While GST tends to move with overall GDP, direct taxes would depend on income growth of individuals and profit growth of companies.  In a lower GDP growth environment, the effect on these two items may be higher than the deceleration of nominal GDP, bringing down the tax-GDP ratio.  Further, customs duties depend on the value of imports, which may have a lower growth.   This would, to some extent, be mitigated by the increase in the rate of excise duty on petroleum products.

These computations have been made considering the 2019-20 revised estimate as the base and the 2020-21 budget estimate as being realistic when it was made.  However, these numbers may also be lower.  For instance, if we extrapolate the net tax revenue growth rate of April 2019 to February 2020 (as released by the Controller General of Accounts) to March 2020, the shortfall is of the order of Rs 1,62,000 crore or 11% of the revised estimate.  Thus, the shortfall in tax collections in 2020-21 may be significantly higher.

Table 1:  Central government's revenue in 2020-21 (Rs crore)

Source

Revenue

Share in Total Revenue

Net Tax Revenue

16,35,909

73%

Non-Tax Revenue

3,85,017

17%

Dividends and Profits

1,55,395

6.9%

Capital Receipts

2,24,967

10%

Disinvestment

2,10,000

9.4%

Total Revenue

22,45,893

-

Note:   Capital receipts and total revenue do not include borrowings.
Sources:  Union Budget Documents; PRS.

Other than taxes, the centre’s receipts consist of non-tax revenue and capital receipts.  A significant part of non-tax revenue is from dividends and profits of public sector enterprises (PSEs) and the RBI (Rs 1.55 lakh crore).  If profitability gets impacted, then there could be an adverse impact in these figures.  The major chunk of capital receipts is budgeted from disinvestment of PSEs (Rs 2.1 lakh crore).  Equity markets have declined sharply over the last month.  If equity markets remain volatile, the disinvestment process and consequently the disinvestment receipts could get affected.  Note that disinvestment receipts were targeted at Rs 2,10,000 crore, significantly higher than the Rs 50,299 crore raised in 2019-20.

Devolution to States

Like the centre, states also rely on taxes for most of their revenue.  As per their 2020-21 budget, on an average, nearly 70% of their revenue is estimated to come from taxes (45% from their own taxes and 25% from their share of centre’s taxes).  Lower collections in centre’s taxes because of the lockdown will also impact states’ share in them (also known as devolution).  Table 2 shows the share of states in centre’s tax revenue and how they could get impacted by a lower economic growth rate due to the lockdown.

Table 2:  Impact of lower economic growth during the lockdown on devolution in 2020-21 (Rs crore)

State/ UT

Share in divisible pool (%)

Devolution

Impact of 1% point drop in national nominal GDP growth rate on Devolution

Revenue impact as a percentage of state’s revenue receipts

Andhra Pradesh

4.11

32,238*

293

NA

Arunachal Pradesh

1.76

13,802

125

0.61%

Assam

3.13

26,776

243

0.26%

Bihar

10.06

91,181

829

0.45%

Chhattisgarh

3.42

26,803

244

0.29%

Delhi

-

-

-

-

Goa

0.39

3,027

28

0.21%

Gujarat

3.4

26,646

242

0.15%

Haryana

1.08

8,485

77

0.09%

Himachal Pradesh

0.8

6,266

57

0.15%

Jammu and Kashmir

-

15,200

138

0.16%

Jharkhand

3.31

25,980

236

0.31%

Karnataka

3.65

28,591

260

0.14%

Kerala

1.94

20,935

190

0.17%

Madhya Pradesh

7.89

61,841* 

562

NA

Maharashtra

6.14

48,109

437

0.13%

Manipur

0.72

5,630

51

0.28%

Meghalaya

0.77

5,999*

55

NA

Mizoram

0.51

3,968

36

0.37%

Nagaland

0.57

4,493

41

0.28%

Odisha

4.63

36,300

330

0.27%

Punjab

1.79

14,021

127

0.14%

Rajasthan

5.98

46,886

426

0.25%

Sikkim

0.39

3,043

28

0.35%

Tamil Nadu

4.19

32,849

299

0.14%

Telangana

2.13

16,727

152

0.11%

Tripura

0.71

5,560

51

0.30%

Uttar Pradesh

17.93

1,52,863

1,389

0.33%

Uttarakhand

1.1

8,657

79

0.19%

West Bengal

7.52

65,835

598

0.33%

Total 

100

8,38,710

7,624

0.22%

Note:  *Andhra Pradesh, Madhya Pradesh, and Meghalaya passed a vote on account, so their devolution data has been computed as the total devolution to states provided in the union budget multiplied by their share.  The devolution data for all other states has been taken from the state budget documents, which may not match with the union budget data in case of a few states.  Revenue receipts data not available for Andhra Pradesh, Madhya Pradesh, and Meghalaya.   The total for revenue receipt share has been computed excluding these three states.
Sources:  Union and State Budget Documents; 15th Finance Commission Report for 2020-21; PRS.

State GST

Out of the 45% revenue coming from state’s own taxes, 35% revenue is estimated to come from three taxes – state GST (19%), sales tax/ VAT (10%), and state excise (6%).  State GST is levied on the consumption of most goods and services within the state.  While state GST is the largest component of states’ own tax revenue, states do not have the autonomy to change tax rates on their own as the rates are decided by the GST Council.  Thus, due to lower GST revenue during the lockdown period, if a state wishes to increase GST rates for the remaining part of the year, it cannot do this on its own.

Table 3 shows the possible impact of a 1%-point decrease in the growth rates of nominal GSDP (GDP of the state) and its impact on state GST revenue in the year 2020-21.  These estimates are based on the assumption that the tax-GSDP ratio during the lockdown remains same as estimated for the 2020-21 budget.  However, as discussed earlier, the tax-GDP ratio for taxes such as GST is likely to decline.  The analysis estimates the minimum impact on states’ GST revenue and does not captures its full extent.

 Table 3:  Impact of lower GSDP growth during the lockdown on state GST revenue in 2020-21 (Rs crore) 

State/ UT

State GST revenue

Impact of 1% point drop in nominal GSDP growth rate on State GST revenue

Revenue impact as a percentage of state’s revenue receipts

Andhra Pradesh

NA 

NA

NA

Arunachal Pradesh

324

3

0.01%

Assam

13,935

128

0.14%

Bihar

20,800

187

0.10%

Chhattisgarh

10,701

97

0.12%

Delhi

23,800

215

0.39%

Goa

2,772

26

0.19%

Gujarat

33,050

292

0.18%

Haryana

22,350

198

0.22%

Himachal Pradesh

3,855

35

0.09%

Jammu and Kashmir

6,065

55

0.06%

Jharkhand

9,450

85

0.11%

Karnataka

47,319

445

0.25%

Kerala

32,388

289

0.25%

Madhya Pradesh

 NA

NA

NA

Maharashtra

1,07,146

957

0.28%

Manipur

914

8

0.05%

Meghalaya

NA

NA

NA

Mizoram

504

4

0.04%

Nagaland

541

5

0.04%

Odisha

15,469

139

0.11%

Punjab

15,859

141

0.16%

Rajasthan

28,250

255

0.15%

Sikkim

650

5

0.07%

Tamil Nadu

46,196

410

0.19%

Telangana

27,600

242

0.17%

Tripura

1,311

12

0.07%

Uttar Pradesh

55,673

525

0.12%

Uttarakhand

5,386

49

0.12%

West Bengal

33,153

298

0.17%

Total 

5,65,461

5,104

0.17%

Note:  Andhra Pradesh, Madhya Pradesh, and Meghalaya passed a vote on account, so data not available.  2020-21 GSDP data for Delhi was not available, so the GSDP growth rate in 2020-21 has been assumed to be the same as the growth rate in 2019-20 (10.5%).
Sources:  State Budget Documents; PRS.

Sales tax/ VAT and State Excise

These two taxes have been major sources of revenue for states, estimated to contribute 16% of states’ revenue in 2020-21.  With implementation of GST, states can now levy sales tax only on petroleum products (petrol, diesel, crude oil, natural gas, and aviation turbine fuel) and alcohol for human consumption.  However, the lockdown has severely impacted the consumption, and thus sale, of all of these goods as most of the transportation is prohibited and businesses selling alcohol are also shut.  As a result, the revenue coming from these taxes is likely to see a much larger impact as compared to the other taxes. 

In addition, alcohol is also subject to state excise.   Table 4 shows the average monthly impact of the lockdown on revenue from state excise.  That is, this estimates the loss of revenue for each month of lockdown, with the assumption that there is no production of alcohol for human consumption during such periods.

Table 4:  Average monthly impact of the lockdown on state excise revenue in 2020-21 (Rs crore)

State/ UT

State excise revenue

Average monthly impact on state excise revenue

Monthly revenue impact as a percentage of state’s revenue receipts

Andhra Pradesh

NA 

NA

NA

Arunachal Pradesh

157

13

0.06%

Assam

1,750

146

0.16%

Bihar

0

0

0.00%

Chhattisgarh

5,200

433

0.52%

Delhi

6,300

525

0.95%

Goa

548

46

0.34%

Gujarat

144

12

0.01%

Haryana

7,500

625

0.69%

Himachal Pradesh

1,788

149

0.39%

Jammu and Kashmir

1,450

121

0.14%

Jharkhand

2,301

192

0.25%

Karnataka

22,700

1,892

1.05%

Kerala

2,801

233

0.20%

Madhya Pradesh

 NA

NA

NA

Maharashtra

19,225

1,602

0.46%

Manipur

15

1

0.01%

Meghalaya

NA

NA

NA

Mizoram

1

0

0.00%

Nagaland

6

0

0.00%

Odisha

5,250

438

0.35%

Punjab

6,250

521

0.59%

Rajasthan

12,500

1,042

0.60%

Sikkim

248

21

0.26%

Tamil Nadu

8,134

678

0.31%

Telangana

16,000

1,333

0.93%

Tripura

266

22

0.13%

Uttar Pradesh

37,500

3,125

0.74%

Uttarakhand

3,400

283

0.67%

West Bengal

12,732

1,061

0.59%

Total 

1,74,164

14,514

0.48%

Note:  Andhra Pradesh, Madhya Pradesh, and Meghalaya passed a vote on account, so data not available.
Sources:  State Budget Documents; PRS.

Sales tax/VAT is collected from sale of alcohol and petroleum products.  We do not have any data on the reduction of sale of these items -- news reports indicating sale of alcohol in some states while petroleum products would be used by providers of essential services.  For estimating the impact on sales tax/ VAT revenue, we have assumed the following three scenarios: (i) 40% shortfall in tax collections, (ii) 60% shortfall in tax collections, and (iii) 80% shortfall in tax collections in any month of lockdown.   Table 5 shows the average monthly impact of the lockdown on sales tax/ VAT revenue under the three scenarios.  

Table 5:  Impact of lockdown on sales tax/ VAT revenue in 2020-21 (Rs crore)

State/ UT

Loss of sales tax/ VAT revenue per lockdown month

As a percentage of state’s revenue receipts

40% shortfall

60% shortfall

80% shortfall

40% shortfall

60% shortfall

80% shortfall

Andhra Pradesh

NA

NA

NA

NA

NA

NA

Arunachal Pradesh

9

14

18

0.04%

0.07%

0.09%

Assam

178

267

356

0.19%

0.29%

0.39%

Bihar

194

292

389

0.11%

0.16%

0.21%

Chhattisgarh

138

207

276

0.16%

0.25%

0.33%

Delhi

207

310

413

0.37%

0.56%

0.75%

Goa

41

62

83

0.31%

0.47%

0.62%

Gujarat

774

1,162

1,549

0.48%

0.72%

0.95%

Haryana

357

535

713

0.40%

0.59%

0.79%

Himachal Pradesh

56

84

112

0.15%

0.22%

0.29%

Jammu and Kashmir

50

75

100

0.06%

0.09%

0.11%

Jharkhand

195

293

391

0.26%

0.39%

0.52%

Karnataka

593

889

1,186

0.33%

0.49%

0.66%

Kerala

775

1,163

1,551

0.68%

1.01%

1.35%

Madhya Pradesh

NA

NA

NA

NA

NA

NA

Maharashtra

1,333

2,000

2,667

0.38%

0.58%

0.77%

Manipur

9

14

18

0.05%

0.08%

0.10%

Meghalaya

NA

NA

NA

NA

NA

NA

Mizoram

3

4

5

0.03%

0.04%

0.06%

Nagaland

9

13

18

0.06%

0.09%

0.12%

Odisha

292

438

583

0.23%

0.35%

0.47%

Punjab

186

279

372

0.21%

0.32%

0.42%

Rajasthan

700

1,050

1,400

0.40%

0.61%

0.81%

Sikkim

7

11

15

0.09%

0.14%

0.18%

Tamil Nadu

1,868

2,802

3,736

0.85%

1.28%

1.70%

Telangana

880

1,320

1,760

0.61%

0.92%

1.23%

Tripura

15

22

30

0.09%

0.13%

0.17%

Uttar Pradesh

943

1,414

1,886

0.22%

0.33%

0.45%

Uttarakhand

66

98

131

0.15%

0.23%

0.31%

West Bengal

251

377

503

0.14%

0.21%

0.28%

Total 

10,130

15,195

20,260

0.34%

0.51%

0.67%

Note:   Andhra Pradesh, Madhya Pradesh, and Meghalaya passed a vote on account, so data not available.
Sources:  State Budget Documents; PRS.

How much can GST compensation help?

The shortfall in state GST revenue could get offset by the GST compensation provided to states by the central government.   The GST (Compensation to States) Act, 2017, requires the central government to provide compensation to states for loss of revenue arising due to GST implementation until 2022.  For this purpose, the Act guarantees a 14% annual growth rate in state GST revenue, which is much higher than the growth likely in the year 2020-21.  As a result, the central government would be required to provide states a compensation equivalent to the shortfall in growth in their state GST revenue, in comparison to the 14% growth.

However, it is likely that there may not be sufficient funds to provide compensation to states in 2020-21.  Compensation to states is given out of the GST Compensation Fund, which consists of collections of a cess levied specifically to generate funds for this purpose.  The cess is levied on coal, tobacco and its products, pan masala, automobiles, and aerated drinks.  The cess collections may see a shortfall as the sale of many of these goods is likely to be affected this year.  Note that domestic automobile sales declined 18% in 2019-20 over the previous year while coal production stayed constant.

In the 2020-21 budget, the central government estimated to provide Rs 1,35,368 crore as compensation to states, which is close to the total compensation estimated by states in their budgets.  However, due to the lockdown, the cess collections financing these grants are estimated to decrease, whereas the compensation requirement of states is estimated to increase due to lower GST collections.   While there is a risk that any incremental requirement may not be met, states’ revenue can see a much larger impact if cess collections are not even sufficient to meet their existing amounts as per the 2020-21 budgets (Table 6).  States, on an average, depend on GST compensation grants for 4.4% of their revenue in 2020-21.  However, states such as Gujarat, Punjab, and Delhi expect almost 14-15% of their revenue in 2020-21 to come in the form of GST compensation grants.

Table 6:   GST compensation grants estimated by states in 2020-21 (Rs crore)

State/ UT

GST Compensation

GST compensation as a percentage of state’s revenue receipts

Andhra Pradesh

NA 

NA

Arunachal Pradesh

0

0.0%

Assam

1,000

1.1%

Bihar

3,500

1.9%

Chhattisgarh

2,938

3.5%

Delhi

7,800

14.1%

Goa

1,358

10.2%

Gujarat

22,510

13.9%

Haryana

7,000

7.8%

Himachal Pradesh

3,338

8.7%

Jammu and Kashmir

3,177

3.6%

Jharkhand

1,568

2.1%

Karnataka

16,116

9.0%

Kerala

0

0.0%

Madhya Pradesh

 NA

NA

Maharashtra

10,000

2.9%

Manipur

0

0.0%

Meghalaya

NA

NA

Mizoram

0

0.0%

Nagaland

0

0.0%

Odisha

6,200

5.0%

Punjab

12,975

14.7%

Rajasthan

4,800

2.8%

Sikkim

0

0.0%

Tamil Nadu

10,300

4.7%

Telangana

0

0.0%

Tripura

208

1.2%

Uttar Pradesh

7,608

1.8%

Uttarakhand

3,571

8.4%

West Bengal

4,928

2.7%

Total 

1,30,894

4.4%

Note:   Andhra Pradesh, Madhya Pradesh, and Meghalaya passed a vote on account, so data not available.
Sources:  State Budget Documents; PRS.

A similar scenario played out last year when due to the economic slowdown, the cess collections were not sufficient to meet states’ compensation requirements.  As a result, states have received the GST compensation only till November 2019.  Note that the GST (Compensation to States) Act, 2017 provides that the GST Council can recommend other funding mechanisms for the Compensation Fund.  For instance, this can be done when there is a shortfall of money in the Fund for providing compensation to states.

Impact on State Finances

In light of such severe stress on the revenue side, states will have to either cut their budgeted expenditure or increase their borrowings to meet the budget targets.  Note that because of the coronavirus pandemic and the lockdown, states are also making unforeseen expenditure in the health sector and for providing relief from the lockdown.  As a result, many states have already started working on the former by drawing up plans to defer or cut their planned expenditure, or divert funds for planned expenditure towards these immediate requirements.  With relatively less flexibility on the side of revenue expenditure, capital expenditure could see a larger cut in many states.  For instance, revenue expenditure includes expenditure committed towards payment of interest, salaries, and pension.  On average, this committed expenditure uses up 50% of states’ revenue.  However, some states have already gone ahead and deferred or cut the expenditure towards payment of salaries.  Also, with private consumption and investment expected to remain sluggish, reduction of government expenditure could lead to a further decline in GDP.

The other option for states is to increase their borrowings.  However, states’ borrowings are limited by their FRBM laws at 3% of their GSDP (with a further 0.5% of GSDP if they fulfil some conditions).  States also need the consent of the central government to borrow money.  While most states had already budgeted their fiscal deficit for 2020-21 near the upper limit, it seems some states do have some fiscal space to borrow more (Table 7).   However, with GSDP expected to take a hit because of the lockdown, fiscal deficit as a percentage of GSDP for all states could be higher than budgeted targets, even if they do not make any additional borrowings.

Table 7:  Fiscal deficit estimates for 2020-21 as a percentage of GSDP

State/ UT

2019-20 (Revised)

2020-21 (Budgeted)

Andhra Pradesh

NA 

NA

Arunachal Pradesh

3.1%

2.4%

Assam

5.7%

2.3%

Bihar

9.5%

3.0%

Chhattisgarh

6.4%

3.2%

Delhi

-0.1%

0.5%

Goa

4.7%

5.0%

Gujarat

1.6%

1.8%

Haryana

2.8%

2.7%

Himachal Pradesh

6.4%

4.0%

Jammu and Kashmir

NA 

5.0%

Jharkhand

2.3%

2.1%

Karnataka

2.3%

2.6%

Kerala

3.0%

3.0%

Madhya Pradesh

NA 

NA

Maharashtra

2.7%

1.7%

Manipur

8.9%

4.1%

Meghalaya

 NA

 NA

Mizoram

8.3%

1.7%

Nagaland

9.0%

4.8%

Odisha

3.4%

3.0%

Punjab

3.0%

2.9%

Rajasthan

3.2%

3.0%

Sikkim

4.3%

3.0%

Tamil Nadu

3.0%

2.8%

Telangana

2.3%

3.0%

Tripura

6.2%

3.5%

Uttar Pradesh

3.0%

3.0%

Uttarakhand

2.5%

2.6%

West Bengal

2.6%

2.2%

Centre

3.8%

3.5%

Note:   Andhra Pradesh, Madhya Pradesh, and Meghalaya passed a vote on account, so data not available.
Sources:  Union and State Budget Documents; PRS.

Government of Bihar’s response to COVID-19 (till Apr 19, 2020)

On March 22, Bihar registered its first two cases of the new coronavirus disease (COVID-19), one of whom died the same day.  Since then, the number of cases has increased steadily. As of April 19, Bihar has 86 confirmed cases of COVID-19, of which 47 are active cases and 37 have recovered.  33 new cases have been registered since last week. One more death has been registered since March 22.

Given the highly contagious nature of the disease, on March 22, the Government of Bihar announced a state-wide lockdown till March 31.  This was followed by a nation-wide lockdown enforced by the central government between March 25 and April 14, now extended up to May 3.  During the lockdown, severe restrictions have been placed on the movement of individuals. Establishments have remained closed, except those providing essential goods and services.  Restrictions are likely to be relaxed in less-affected districts post-April 20.

In this blog, we look at key measures taken by the state government in response to COVID-19 so far.

Early-stage: screening of travellers, awareness on precautionary measures

The initial responses from the state government were aimed towards: (i) raising awareness about precautionary measures to be taken against the disease, and (ii) screening of international travellers.  In this context, on February 25, the Bihar State Health Society issued advisories for: (i) measures to be taken in schools and colleges, and (ii) reporting of airline passengers and tourists with symptomatic cases to the district health administration.  On March 11, 104 Call Centre was designated as the COVID-19 control room, to address public queries related to the disease.

Prior to lockdown: limiting mass gatherings, mobilisation of the public health system

Limiting mass gatherings

Between March 13 and March 18, the state government issued orders to shut down various premises until March 31. These include Anganwadi centres, educational institutions, and commercial establishments such as cinema halls, parks, and shopping malls. The government staff was directed to come to office on alternate days. Gathering of more than 50 persons at one place was prohibited including any mass family gathering (except marriages).  The transport department was asked to restrict both public and private transport.

Healthcare measures

Welfare measures

  • On March 16, the Chief Minister announced that treatment costs for COVID-19 for residents of Bihar will be sponsored from the Chief Minister Medical Assistance Fund.  Moreover, the state government will provide assistance of four lakh rupees to the family of a person dying due to COVID-19.

  • The government issued directions to provide direct cash transfer in place of the food provided under the Mid-Day Meal scheme in schools, and at Anganwadi centres.

Essential goods and services

On March 21, the Food and Consumer Protection Department directed the district administration to ensure implementation of the Bihar Essential Article (Display of Prices and Stocks) Order, 1977.  The Order requires sellers of specified items to display stock and price for the public’s reference.  The specified items include food items, edible oilseeds, and petroleum products.  The Department also directed the district administration to send proposals for adding any new items to the list of specified items.

During lockdown: strengthening medical response, welfare measures

Upon announcement of the lockdown on March 22, state-level and district-level coordination committees were set up.  During the lockdown, the state government’s measures have been aimed towards: (i) strengthening the medical response in the state, (ii) providing relief to various sections of society from issues being faced during the lockdown, and (iii) addressing difficulties with the supply of essential goods and services.

Healthcare measures

  • On March 25, the Health Department constituted the Bihar COVID-19 Emergency Response Team which is responsible for the control and coordination of all health-related response.

  • Protocols for containment and treatment: Directions have been issued to implement several guidelines related to containment and treatment measures.  These include: (i) set up and operationalization of isolation centres and quarantine centres, (ii) containment plan to address local transmission and community transmission through cluster containment strategy, (iii) surveillance program for Influenza-like Illness (ILI) and Severe Acute Respiratory Illness (SARI), (iv) handling of waste generated during treatment/diagnosis/quarantine, and (v) sanitation of residence and nearby areas of a COVID-19 positive person.

  • Door-to-door screening campaign: On April 14, the Chief Minister issued directions to start door-to-door screening campaign for suspected cases in affected districts including Siwan, Begusarai, and Nalanda.  Such screening campaign will also be run in districts in border-areas, and an area within 3 km radius of the residence of COVID-19 positive patients.

  • Increasing manpower: The government invited medical professionals including doctors, nurses, and paramedics to volunteer.  It also directed the district administration to engage retired doctors, nurses, and paramedics from defence services for volunteer work.  Leaves of all employees of the Health Department were cancelled until April 30.  The Health Department deputed AYUSH practitioners to assist at isolation and quarantine centres.

  • Dedicated infrastructure for COVID-19: On April 5, certain government hospitals were designated as exclusive hospitals for treatment of COVID-19 patients.  The Health Department also directed certain big private hospitals in Patna to stop OPD services.

  • Other health-related measures: On March 23, the state government announced payment of one-month basic salary as an incentive to all doctors and health workers.  On April 13, the Health Department issued an order prohibiting spitting in public places by tobacco, cigarette, and Pan users.  Further, the state government announced that it will procure test kits from the private sector.

Welfare measures

  • Relief package: On March 23, the state government announced a relief package for people affected due to lockdown.  Key features of the relief package are: 

  1. ration of one-month to all ration cardholders for free,

  2. one-time cash transfer of Rs 1,000 per family to ration cardholders,

  3. payment of pensions for three months in advance to all pensioners including pension for old age persons, widows, and physically challenged, and

  4. release of pending scholarships to all students.

  • Help for migrants: On March 26, Rs 100 crore was allocated from the Chief Minister Relief Fund to provide aid to the migrants from Bihar stuck in other parts of the country due to the lockdown.  On April 2, the state government announced that a one-time cash transfer of Rs 1,000 will be provided to the migrants.  On April 13, an additional Rs 50 crore was allocated from the Relief Fund for this purpose.  State-wise nodal officers have been appointed for coordination of relief efforts for migrants.  The state government is running 10 food centres in Delhi to help migrants from Bihar.

  • Relief camps: On March 28, the state government decided to start relief camps along the border (including Nepal border) offering food, shelter, and medical help to persons coming in the state.  Community kitchens and relief camps have been started in government school campuses to provide food and shelter. 

  • Electricity tariff:  On April 8, the State Cabinet approved the proposals for: (i) reducing electricity tariff for domestic and agricultural consumers by 10 paise per unit and (ii) waiving the monthly meter fee.

Measures for businesses and agricultural activities

  • The state government provided certain relaxations to businesses in matters related to taxation.  These include:

  1. extension in the deadline for payment of GST from March 31 to June 30, no interest or penalty charges to be levied for late payment in certain cases,

  2. three-month extension in the deadline for one-time settlement scheme for pre-GST tax disputes, and

  3. cancellation of orders regarding attachment of bank accounts of certain tax defaulters.

  • On April 16, the Chief Minister issued directions to start procurement of wheat through the Primary Agriculture Credit Society (PACS).

Essential goods and services

Other Measures

Education:  On April 8, the cabinet approved the proposal to promote students of Class I to XI (except class X) without annual examination.

Legislature:  Salaries of MLAs and MLCs have been reduced by 15% for one year.  The amount will be donated to the state’s Corona relief fund.

Labour and employment:  On April 16, the Chief Minister issued directions to resume public works under the Saat Nischay Programme, Jal Jeevan Hariyali Yojana, and MNREGA.

For more information on the spread of COVID-19 and the central and state government response to the pandemic, please see here.

Government of West Bengal’s response to the COVID-19 pandemic (till April 18, 2020)

With the spread of COVID-19, along with the central government, state governments have also announced several policy decisions to contain and prevent the spread of the virus.  In this blog post, we summarise some of the key measures taken by the government of West Bengal in this regard as of April 18, 2020. 

As of April 18, 2020, there have been 287 confirmed cases of COVID-19 in West Bengal. Of these, 55 have been discharged and 10 have died.  To manage patients, there are 66 COVID hospitals, eight testing laboratories, and 582 institutional quarantine centres in the state. 

image

Early response: Leading up to lockdown

Between January and February, the state government's efforts were aimed at raising awareness among citizens on COVID-19.  These include advisories on observing precautionary measures, and informing citizens on travel restrictions, home isolation, and screening protocols for foreign returnees.

On March 2, the state government responded to the growing number of suspected cases by issuing guidelines for preparedness by government medical colleges and hospitals.   These covered admission, isolation and management of suspected COVID-19 cases.  These instructions were extended to private medical colleges and hospitals on March 7.  A week later, the government issued protocols for monitoring travellers at various state checkposts by joint teams of state police and paramedical staff, and for reference of symptomatic patients to isolation facilities in the district.  All cases had to be reported on a daily basis to district surveillance teams.  The government also announced the closure of all educational institutions in the state (government and private) till March 31.  

On March 16, the government notified the West Bengal Epidemic Disease COVID-19 Regulations, 2020.  These regulations specify screening and treatment protocol for COVID-19 patients, and empower the district administration to take containment measures to curb the spread of COVID-19.   

The next day, the state reported its first confirmed case of COVID-19.  The government proceeded to issue orders: (i) for segregating isolation wards for suspected and confirmed COVID-19 cases, (ii) specifying treatment protocols for confirmed cases, (iii) establishing medical boards in all COVID-19 hospitals with representation from different medical disciplines, and (iv) establishing fever clinics for suspected patients.  Anganwadi centres and creches were also closed, with provisions to ensure supply of two kilograms of rice and potatoes to each beneficiary.  

On March 21, the government ordered the closure of certain establishments to restrict non-essential social gatherings till March 31, 2020.  This included closure of restaurants, clubs, amusement parks, and museums.  Further, all trains entering the state and inter-state buses were banned till March 31, 2020.

Subsequently, the government announced a lockdown.  In addition to steps for physical containment, the government also undertook various health and welfare measures.  These are detailed below.

Measures taken post-lockdown

On March 22, a lockdown was announced in 23 areas of the state until March 27.  Restrictions during the lockdown included: (i) prohibition on public gatherings of over seven people, (ii) suspension of public transport, and (iii) closure of shops, commercial establishments, offices and factories.  Establishments providing essential goods and services such as health services, print media, banks, groceries, and e-commerce delivery of food and groceries, were excluded from the restrictions.  Over the next few weeks, steps were taken to expand these exemptions, and to regulate the movement of goods and services.

  • List of essential goods and services:  On March 24, the lockdown was extended till March 31 in the entire state, and the exemptions were expanded to include industries producing coal, power, steel, or fertilisers.   After the centre notified a 21-day lockdown, the list of exemptions in the state was gradually expanded to include agricultural operations, fish production, tea garden operations, and operations in krishak bazars for marketing agricultural produce.  At the same time, restrictions were placed on hoarding of masks and hand sanitisers.  

  • Last week, after the central government extended the lockdown till May 3,  orders were passed for resumption of government offices from April 20 onwards at a strength of 25% of workforce.  Similar permission was also granted for restricted operations in jute mills, and IT/IT enabled services.  

  • Regulating movement of goods and services:  A pass system was introduced on March 25 to regulate the movement of persons supplying essential goods and services.  Transportation of non-essential cargo was prohibited till March 31, 2020.  However, as a one-time measure, permission was granted on March 26 to such vehicles to reach their destination.  Two days later, the government ordered for the seamless movement of commodities in all district borders and interstate areas. 

Health Measures

On March 26, a Committee of Experts was constituted to advise on strategies for isolation, quarantine, testing, health infrastructure, and disease prevention.  The Committee has been issuing protocols on clinical management of COVID-19 cases.  The government also established various monitoring committees on setting up isolation hospitals, managing critical care, and to audit the cause of deaths related to COVID-19 patients.  

To respond to the increasing number of patients, the government acquired private healthcare facilities in April.  Further, to expand its testing capacity, the government recommended sample pooling for COVID-19 testing yesterday.

In addition to these measures, the government also issued several guidelines, advisories and orders on containment of the virus, patient handling and protecting healthcare workers.  Some of these are detailed below: 

  • For healthcare facilities:  Advisory for setting up of isolation facilities, orders for establishment of fever clinics to segregate patients with severe symptoms, separation zones for suspected cases to protect healthcare personnel, and use of hydroxychloroquine for asymptomatic healthcare workers.

  • For government:  Guidelines for cluster containment and treatment strategies to contain COVID-19 in hi-risk spots, directions for awareness generation among rural population for containment, and arranging for counselling sessions for quarantined patients.

Welfare/Austerity Measures

  • Creation of relief fund:  The “West Bengal State Emergency Relief Fund” was created on March 23 to mobilise additional resources to cope with the emergency.  On April 2, austerity measures were announced by the government.   These include prohibition on announcement of new schemes, unless required in urgent public interest.

  • Distribution of food:  Free entitlement of wheat and rice was announced on March 26 to beneficiaries under some food subsidy schemes (including the Antyodaya Anna Yojana) until September, 2020.

  • Measures for workers:   Directions were notified in March for provisions on shelter, food, quarantine, wage payment, and continued tenancy for workers.   

  • Free insurance cover was announced on April 1 for treatment of certain categories of persons, including heathcare workers, and police.

For more information on the spread of COVID-19 and the central and state government response to the pandemic, please see here.

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Madhya Pradesh Government’s Response to COVID-19 (January 2020- April 17, 2020)

As of April 17, Madhya Pradesh has 1,120 confirmed cases of COVID-19 - the fifth-highest among all states in India.  The Government of Madhya Pradesh issued one of its initial COVID-19 related orders around January 28, 2020, advising healthcare workers to use appropriate protective gear when examining patients from Wuhan, China.   Since then, the government has taken several actions to contain the spread and impact of COVID-19.  In this blog, we look at key measures taken so far.

Figure 1: Day-wise COVID-19 cases in Madhya Pradesh

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Early stages: Focus on screening international travellers

On January 28, the state government issued directions to monitor international travellers from specified countries, test and maintain surveillance on those who are symptomatic.  A further order required district administrators to monitor and report on all passengers who arrived from China between December 31, 2019 and January 29, 2020.  While efforts were largely focused on screening and testing, the first quarantine restrictions for symptomatic travellers from China, entering India after January 15, were imposed on January 31.  Those leaving quarantine were subsequently kept under surveillance and their health conditions reported on for a period of 14 days.  By February 13, a constant presence of a medical team at the airport was required to test foreign passengers from an increasing list of countries and send daily reports.  

February and early March: Improving public health capacity, restricting social gatherings

The next steps from the government were aimed towards adapting the public health infrastructure to handle the evolving situation.  Following are some of the steps taken in this regard:

  • A helpline, with a dedicated call centre, was set up to inform citizens about COVID-19 and its prevention.
  • The regional directors of the Directorate of Health Services, Government of Madhya Pradesh, were instructed to ensure availability of N-95 masks and PPE kits in their region.
  • The Health Department issued guidelines to the Chief Medical and Health Officials in the State regarding the collection and transport of COVID-19 test samples.
  • Medical professionals in public hospitals were ordered to attend a national training.
  • An order was issued to improve arrangements for quarantine and isolation wards.
  • Leaves were cancelled for all employees/officers of the Health Department. 
  • To grant certain rights to establish effective control over outbreak affected areas and take swift actions, section 71 of the Madhya Pradesh Public Health Act, 1949 was invoked.  This section of the Act provides all Chief Medical and Health Officers and Civil Surgeon cum Chief Hospital Superintendents rights set out therein.  

As the number of cases in India increased through March, the MP government turned focus and issued orders directly concerning their citizens.   Several measures were undertaken to spread awareness about COVID-19 and implement social distancing.  

  • dedicated portal was created for COVID-19 related information.  
  • An order was issued to close several establishments including schools, colleges, cinema halls, gyms and swimming pools.  Biometric attendance was stopped at all government workplaces. 
  • On March 20, the government issued an order (effective till June 15) requiring suppliers of masks and sanitizers to: (i) maintain a fixed price and (ii) keep and present fortnightly, a record of purchase and sales of the essential items.  The order also prevented them from refusing to sell to any customer. 

March 21 Onwards

On March 21, MP reported four cases of COVID-19. On March 23, the government released the Madhya Pradesh Epidemic Diseases, COVID-19 Regulations 2020 to prevent the spread of COVID-19 in the state.  These regulations specify special administrative powers and protocol for hospitals (government and private) to follow while treating COVID-19 patients. These regulations are valid for one year. Over and above general instructions to maintain social distancing and personal hygiene, the government has undertaken specific measures to: (i) increase healthcare capacity, (ii) institute welfare protection for the economically vulnerable population, (iii) strengthen the administrative structure and data collection, and (iv) ensure supply of essential goods and services.  These measures include-

Healthcare measures

  • Preparation of hospitals for the treatment of COVID-19 including postponing elective surgeries, ensuring an adequate supply of PPE kits. 
  • On March 28, the Bhopal Memorial Hospital and Research Centre was designated as a state-level COVID-19 hospital.  This order was reversed on April 15. 
  • District collectors were empowered to appoint doctors and other healthcare workers as required in their districts in a fast-tracked manner.
  • Establishing a telemedicine unit in each of the 51 district hospitals
  • Facilitating the appointment of final year undergraduate nursing students as nurses
  • On March 29, the government launched the SAARTHAK app for daily monitoring and tracking of quarantined and corona positive patients
  • The government released a strategy document to contain COVID-19. This strategy places emphasis on identification of suspected cases, isolation, testing of high-risk contacts, and treatment (called the I. I. T. T. strategy)

Welfare measures

  • One-time financial assistance of Rs 1,000 will be provided to construction labourers
  • One-time financial assistance of Rs 2,000 will be provided to families of Sahariya, Baiga and Bharia tribes
  • Social security pensions for two months will be paid in advance to pensioners
  • People without eligibility slips under the National Food Security Scheme to be allowed to receive ration 

Administrative measures

  • Senior officials were designated to coordinate with various states to resolve issues regarding migrant labour.
  • District Crisis Management groups were formed to coordinate state-level policy and the local implementation machinery.

Supply of essential goods and services

  • On April 8, the government implemented the Essential Services Management Act,1979. The Act among other things, prohibits anyone employed in essential services to refuse to work.
  • E-pass procurement facility was started to ensure smooth inter-district and across states flow of essential goods & services.  

For more information on the spread of COVID-19 and the central and state government response to the pandemic, please see here.

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