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The Covid-19 pandemic has come with whole new set of challenges to Governments across the world in terms of policy-making. India is no exception. Raising enough resources for public welfare while ensuring sustainability is proving to be one of the biggest challenges.

In this back-drop of financial crunch seen across the world, do you know that Indian states were able to borrow significantly more in 2020-21? It would perhaps pleasantly surprise you that states were able to raise an extra Rs 1.06 lakh crores in 2020-21. This significant increase in availability of resources was made possible by an approach of Centre-State bhagidari. 

When we formulated our economic response to the Covid-19 pandemic, we wanted to ensure that our solutions do not follow a ‘one size fits all’ model. For a federal country of continental dimensions, finding policy instruments at the national level to promote reforms by State Governments is indeed challenging. But, we had faith in the robustness of our federal polity and we moved ahead in the spirit of Centre-State bhagidari. 

In May 2020, as part of the Aatmanirbhar Bharat package, the Government of India announced that State Governments would be allowed enhanced borrowing for 2020-21. An extra 2% of GSDP was allowed, of which 1% was made conditional on the implementation of certain economic reforms. This nudge for reform is rare in Indian public finance. This was a nudge, incentivising the states to adopt progressive policies to avail additional funds. The results of this exercise are not only encouraging but also run contrary to the notion that there are limited takers for sound economic policies.

The four reforms to which additional borrowings were linked (with 0.25% of GDP tied to each one) had two characteristics. Firstly, each of the reforms was linked to improving the Ease of Living to the public and particularly the poor, the vulnerable, and the middle class. Secondly, they also promoted fiscal sustainability.

The first reform under the ‘One Nation One Ration Card’ policy required State Governments to ensure that all ration cards in the State under the National Food Security Act (NFSA) were seeded with the Aadhaar number of all family members and that all Fair Price Shops had Electronic Point of Sale devices. The main benefit from this is that migrant workers can draw their food ration from anywhere in the country. Apart from these benefits to citizens, there is the financial benefit from the elimination of bogus cards & duplicate members. 17 states completed this reform and were granted additional borrowings amounting to Rs. 37,600 crores. 

The second reform, aimed at improving ease of doing business, required states to ensure that renewal of business-related licences under 7 Acts is made automatic, online and non-discretionary on mere payment of fees. Another requirement was implementation of a computerized random inspection system and prior notice of inspection to reduce harassment and corruption under a further 12 Acts. This reform (covering 19 laws) is of particular help to micro and small enterprises, who suffer the most from the burden of the ‘inspector raj'. It also promotes an improved investment climate, greater investment and faster growth. 20 states completed this reform and were allowed additional borrowing of Rs. 39,521 crores. 

The 15th Finance Commission and several academics have emphasised the crucial importance of sound property taxation. The third reform required states to notify floor rates of property tax and of water & sewerage charges, in consonance with stamp duty guideline values for property transactions and current costs respectively, in urban areas. This would enable better quality of services to the urban poor and middle class, support better infrastructure and stimulate growth. Property tax is also progressive in its incidence and thus the poor in urban areas would benefit the most. This reform also benefits municipal staff who often face delay in payment of wages. 11 states completed these reforms and were granted additional borrowing of Rs. 15,957 crores. 

The fourth reform was introduction of Direct Benefit Transfer (DBT) in lieu of free electricity supply to farmers. The requirement was for formulation of a state-wide scheme with actual implementation in one district on a pilot basis by year end. Additional borrowing of 0.15% of GSDP was linked to this. A component was also provided for reduction in technical & commercial losses and another for reducing the gap between revenues and costs (0.05% of GSDP for each). This improves the finances of distribution companies, promotes conservation of water and energy and improves service quality through better financial and technical performance. 13 states implemented at least one component, while 6 states implemented the DBT component. As a result, Rs. 13,201 crore of additional borrowings was permitted. 

Overall, 23 states availed of additional borrowings of Rs. 1.06 lakh crores out of a potential of Rs. 2.14 lakh crores. As a result, the aggregate borrowing permission granted to states for 2020-21 (conditional and unconditional) was 4.5% of the initially estimated GSDP. 

For a large nation with complex challenges as ours, this was a unique experience. We have often seen that for various reasons, schemes and reforms remain un-operational often for years. This was a pleasant departure from the past where the Centre & States came together to roll out public friendly reforms in a short span of time amidst the pandemic. This was made possible due to our approach of Sabka Saath, Sabka Vikas and Sabka Vishwas. Officials who have been working on these reforms suggest that without this incentive of additional funds, enactment of these policies would have taken years. India has seen a model of ‘reforms by stealth and compulsion’. This is a new model of ‘reforms by conviction and incentives’. I am thankful to all the states who took the lead in ushering in these policies amidst tough times for the betterment of their citizens. We shall continue working together for the rapid progress of 130 crore Indians.

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Why India and the World Need Gandhi
October 02, 2019
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The great leader envisioned a world where every citizen has dignity and prosperity.

Upon reaching India in 1959, the Rev. Dr. Martin Luther King Jr. remarked, “To other countries I may go as a tourist, but to India I come as a pilgrim”. He added, “Perhaps, above all, India is the land where the techniques of nonviolent social change were developed that my people have used in Montgomery, Alabama, and elsewhere throughout the American South. We have found them to be effective and sustaining — they work!”

The guiding light whose inspiration got Dr. King to India was Mohandas Karamchand Gandhi, the Mahatma, the Great Soul. On Wednesday, we observe his 150th birth anniversary. Gandhi Ji, or Bapu, continues to give courage to millions globally.

Gandhian methods of resistance ignited a spirit of hope among several African nations. Dr. King remarked: “When I was visiting in Ghana, West Africa, Prime Minister Nkrumah told me that he had read the works of Gandhi and felt that nonviolent resistance could be extended there. We recall that South Africa has had bus boycotts also.”

Nelson Mandela referred to Gandhi as “the Sacred Warrior” and wrote, “His strategy of noncooperation, his assertion that we can be dominated only if we cooperate with our dominators, and his nonviolent resistance inspired anticolonial and antiracist movements internationally in our century.”

For Mr. Mandela, Gandhi was Indian and South African. Gandhi would have approved. He had the unique ability to become a bridge between some of the greatest contradictions in human society.

In 1925, Gandhi wrote in “Young India”: “It is impossible for one to be internationalist without being a nationalist. Internationalism is possible only when nationalism becomes a fact, i.e., when peoples belonging to different countries have organized themselves and are able to act as one man.” He envisioned Indian nationalism as one that was never narrow or exclusive but one that worked for the service of humanity.

Mahatma Gandhi also epitomized trust among all sections of society. In 1917, Ahmedabad in Gujarat witnessed a huge textile strike. When the conflict between the mill workers and owners escalated to a point of no return, it was Gandhi who mediated an equitable settlement.

Gandhi formed the Majoor Mahajan Sangh, an association for workers’ rights. At first sight, it may seem just another name of an organization but it reveals how small steps created a large impact. During those days, “Mahajan” was used as a title of respect for elites. Gandhi inverted the social structure by attaching the name “Mahajan” to “Majoor,” or laborers. With that linguistic choice, Gandhi enhanced the pride of workers.

And Gandhi combined ordinary objects with mass politics. Who else could have used a charkha, a spinning wheel, and khadi, Indian homespun cloth, as symbols of economic self-reliance and empowerment for a nation?

Who else could have created a mass agitation through a pinch of salt! During colonial rule, Salt Laws, which placed a new tax on Indian salt, had become a burden. Through the Dandi March in 1930, Gandhi challenged the Salt Laws. His picking up a small lump of natural salt from the Arabian Sea shore led to the historic civil disobedience movement.

There have been many mass movements in the world, many strands of the freedom struggle even in India, but what sets apart the Gandhian struggle and those inspired by him is the wide-scale public participation. He never held administrative or elected office. He was never tempted by power.

For him, independence was not absence of external rule. He saw a deep link between political independence and personal empowerment. He envisioned a world where every citizen has dignity and prosperity. When the world spoke about rights, Gandhi emphasized duties. He wrote in “Young India”: “The true source of rights is duty. If we all discharge our duties, rights will not be far to seek.” He wrote in the journal Harijan, “Rights accrue automatically to him who duly performs his duties.”

Gandhi gave us the doctrine of trusteeship, which emphasized the socio-economic welfare of the poor. Inspired by that, we should think about a spirit of ownership. We, as inheritors of the earth, are responsible for its well-being, including that of the flora and fauna with whom we share our planet.

In Gandhi, we have the best teacher to guide us. From uniting those who believe in humanity to furthering sustainable development and ensuring economic self-reliance, Gandhi offers solutions to every problem.

We in India are doing our bit. India is among the fastest when it comes to eliminating poverty. Our sanitation efforts have drawn global attention. India is also taking the lead in harnessing renewable resources through efforts like the International Solar Alliance, which has brought together several nations to leverage solar energy for a sustainable future. We want to do even more, with the world and for the world.

As a tribute to Gandhi, I propose what I call the Einstein Challenge. We know Albert Einstein’s famous words on Gandhi: “Generations to come will scarce believe that such a one as this ever in flesh and blood walked upon this earth.”

How do we ensure the ideals of Gandhi are remembered by future generations? I invite thinkers, entrepreneurs and tech leaders to be at the forefront of spreading Gandhi’s ideas through innovation.

Let us work shoulder to shoulder to make our world prosperous and free from hate, violence and suffering. That is when we will fulfill Mahatma Gandhi’s dream, summed up in his favorite hymn, “Vaishnava Jana To,” which says that a true human is one who feels the pain of others, removes misery and is never arrogant.

The world bows to you, beloved Bapu!