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‘Game of Loans’- a Sleep Pill to Assam


The COVID-19 outbreak was declared as a global pandemic by the World Health Organization on March 11, 2020.  Since then, the virus has adversely affected every country in the World. The pandemic has toppled the Global economy. Most of the developed countries are failing to cope up with it.

Likewise, the virus has been detrimental to the Indian Economy as well. According to a GDP data released for the first quarter (April-June) of the financial year 2020-21, India’s GDP has shrunk by 23.9%, the sharpest contraction since the country started releasing quarterly data in 1996.  Assam too has been economically burdened by the COVID-19 pandemic.

Flustered by the financial crisis in the state, Dr Himanta Biswa Sarma, the Finance minister of Assam, in a recent statement stated that the state is set to take a loan of Rs. 22,500 cr by April 2021.

Owing to the financial crisis due to the COVID-19 pandemic, the state government has taken only a few important projects in their hands. Also, there has been contraction in the works of the government sector.  There has also been a cut in the salary of MLAs and ministers. However, the salary and pension of state officials have not been hampered until now. The state needs around Rs. 2800 cr in the name of salary and pension.

The decision of the Centre to stop GST compensation has also given a big blow to the financial status of Assam. During the implementation of GST, the Centre promised to pay the state’s 14% compensation from 2017 to 2022. But, due to their incompetency to pay the 14% GST compensation, the Centre has urged the state governments to take loans.

As per rule, Assam can obtain loans around 3 per cent of India’s Gross Domestic Product (GDP) which amounts approximately Rs. 12000 crore. However, this would not be sufficient enough for the Government to carry on their work till the next elections due in mid-2021.

Meanwhile, the Centre made a provision that if any state government supports the Centre’s new “controversial” Electricity (Amendment) Bill, 2020, then they will help the state in funding.

As per the bill, the state government must give away the electric sector—which is in the concurrent list— to private companies. Moreover, as preplanned, the Assam government gave nod to Centre’s controversial amendment bill.

Sources have informed Headline8 that as a result of the development, Assam can further obtain loan worth Rs. 8000 to Rs. 9000 cr.  As a result, the state can obtain total loan amounting to Rs. 21000 cr.

In the meantime, Dr Himanta Biswa Sarma has another scheme up his pocket. As per norms, the state government must have a minimum amount of Rs. 108 cr in their account. However, if it is less than the stated amount, the state can obtain a loan of Rs. 800 cr from Reserve Bank of India (RBI) at a very low interest.

As the Assam government supported the Centre during the pandemic, the state can obtain Rs. 1500 cr as loan. With the additional Rs.1500 cr, the total loan amounts to Rs. 22500 cr. The state will have about 3 months to return the loan.

However, in this ‘Game of Loans’ between the state and the centre, it’s the people of the state actually who will have to bear the burden.

When the country is likely to go through a recession, there will be a time when Dispur would have to repay the loans. With the revenue generation in the state slowly deteriorating and the centre’s decision to stop GST compensation to the states, the state government will be forced to increase the prices of fuel and other commodities. This will result in a huge economic load for the people of the state who are already suffering because of the pandemic.

While the state economy is at its lowest and unemployment at an all-time high, is it necessary to burden the people with such a load? Does Assam Government really have no other options left? Is the loan the last and best resort?

What do you think?

Written by Mriganka Pathak


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