Q. Why the fiscal condition of States has taken a severe hit in times of Covid crisis? How Covid has put increased pressure on States on expenditure front? Also explain, how increase in Ways and Means Advances (WMA) limit of state governments will help them tide over current financial crisis? (GS Paper III, 250 words, 15 marks)

The economic condition has been severely affected by coronavirus.International institution such as IMF has predicted that India’s GDP growth maybe”zero”or even recession.
Fiscal condition of state –
1) After the declaration of lockdown every economic activity such as industry, transportation, market have been completely shut down.so people can’t pay tax.
2) Due to coronavirus government are spending more and more in health system. Govt are also spending more in the grass root level to keep up the livelihood.
Since in one hand there has no tax collection and other hand government are spending more so consequently govt’s fiscal deficit is increasing day by day.
Pressure on state’s expenditure-
1)In India there has no required health infrastructure as compare to high population.so at the time of pandemic situation there has created maximum pressure on health system so government has to spend more in health.
2) migrant workers have returned to their own state so the concerned state government has taken the responsibility of basic requirements of their such as free ration,free LPG cylinder e.t.c.
3) Government has decided to increase the number of testing.so government are buying more and more testing kit.
WMA limit of state government-1)It is used to reduce the temporary mismatch of govt’s fund
2) Recently RBI has decided to increase the WMA limit upto 60% to state government.
3) central government has aided to state government by special package but it is not enough so state government can use this fund as they want to spend.
4) The health facility of all state is not equal so where the health facility is not so good there state government can use the fund in health system.
5) Due to lockdown the workers of unorganised sector have severely affected so government can use this fund for this section.
So in this situation government can meet their regular expenditure without any impediment.
Conclusion- government can start economic activity where has no case of coronavirus. RBI should increase the WMA limit so that state can catalyse their operation.