The economic impact of the lockdown is likely to be very severe, Tamil Nadu Chief Minister K Palaniswami told Prime Minister Narendra Modi on Saturday and sought a Rs 9,000 crore grant to combat coronavirus and its aftermath.
Many state governments, including Tamil Nadu, have announced relief packages, which have been supplemented by the Pradhan Mantri Garib Kalyan Yojana, he said in a letter to Modi.
Further relief measures would still be required in the days to come and substantial expenditure would also be required to be made to ramp up health infrastructure and medical supplies, he said.
Eventually, measures would also have to be taken to revive economic growth, assist various sectors to return to their growth trajectory and to stimulate consumption and investment demand, the Chief Minister noted.
“The economic impact of the lockdown is likely to be very severe and unprecedented,” he said adding such difficult times called for unconventional measures to ensure that the economy is revived and conventional economic “doctrines and dogmas will need to be set aside temporarily.”
Under the circumstances, he said: “… I request that the Government of India, in addition to permitting the additional borrowing by State Governments, should provide an aggregate amount of at least Rs one lakh crore as a special grant to them to combat the COVID 19 virus and its aftermath.”
This needs to be in addition to the other forms of financial transfers to the States envisaged in the Union Budget and can be financed by the Government of India’s borrowing from the Reserve Bank of India, he said.
The funds can be distributed in proportion of the size of each States GSDP to the national GDP,since the “expenditure out of this grant will also pump prime the economy and lead to its revival, he said and requested that Tamil Nadu be given a grant of Rs 9,000 crore.
Palaniswami also recalled having requested Modi on March the fiscal deficit limits of 3 per cent of GSDP for the financial years 2019-20 and 2020-21 and additional borrowing of 33 per cent above the level permitted for the fiscal year 2019-20 may be allowed for 2020-21, to enable states meet additional expenditure requirements.