During the year FY23, the allocation under the Scheme has been raised to ₹1.
1.05 lakh crore to give further
impetus to State Capex plans. Overall, The COVID-19 pandemic has impacted state finances by increasing expenses and lowering revenues. The Union government has offered support through various initiatives, while states have taken measures to increase their revenue, such as revising property taxes, power tariffs, liquor policies, and privatizing state public sector enterprises. Some states have also adopted revenue-generating measures such as liquidation schemes for payment of arrears, one-time settlement of old VAT dues, and green taxes to discourage use of old vehicles. The RBI has pointed out the low property tax collection in India compared to OECD countries and the need for reforms in property taxation practices.
DEBT PROFILE OF THE GOVERNMENT
The global economy is facing significant concerns over rising government liabilities, resulting from the unprecedented fiscal expansion in 2020. The International Monetary Fund projects that global government debt will be 91% of GDP in 2022, 7.5 percentage points higher than pre-pandemic levels. Against this global backdrop, It is crucial to analyse India's government debt profile. The total liabilities of the Indian Union Government saw a significant increase in the year FY21 due to the COVID-19 pandemic. It led to higher government borrowings to finance additional expenditure needs and a sharp contraction in the GDP. However, the total liabilities moderated from 59.2% of GDP in FY21 to 56.7% in FY22. India's public debt profile is considered to be stable with low currency and interest rate risks. Because the debt portfolio is mostly contracted at fixed interest rates (with floating internal debt constituting only 1.7 percent of GDP in end-March 2021) and has a low interest rate risk. The majority of the Union Government's total net liabilities in March 2021 were denominated in domestic currency (Internal Liability-95.1%) and only 4.9% in sovereign external debt (External Liability), reducing currency risk.