Time to mind rising debt of the states

Time to mind rising debt of the states

The ratio of the states’ debt to gross domestic product (GDP) is poised to rise to a decadal high of 36% this fiscal, due to a slump in economic activity, says a Crisil report.

This underscores the need for states to take aggressive steps not just to collect more revenue but also stop reckless giveaways in power and irrigation. States must agree to fewer goods and services tax (GST) rates, to end exemptions, and bring petro-fuels, electricity duty, real estate and alcohol under the GST.

GST that has subsumed many indirect tax levies leaves audit trails on value addition across the production chain. Pursuing these audit trails rigorously using data analytics will shore up both direct and indirect taxes.

The case for states to lower stamp duty rates, which vary from 2% to 7%, is compelling. A reduction will boost real estate transactions, and encourage transparency as to price.

A collateral benefit would be fuller declaration of capital gains, potentially pushing up the tax on such gains. Incentivising states that lower stamp duty, with a slice of additional capital gains tax realised, merits consideration.

States should consider replacing expensive past debt with the lower-cost debt available today, and the Centre should let them make that extra borrowing.

States should place greater focus on collecting user charges that have been recklessly abandoned. That the Centre has given credit amounting to Rs 1.18 lakh crore for state power distribution companies to clear their dues to generators reveals the level of theft and giveaways in the power sector.

Stable power supply during the day will foster a food processing revolution that is waiting to happen. Irrigation water, too, must fetch user charges that cover maintenance of the dams and canals.