On Sri Lankan crisis trails, Centre nudges states for fiscal discipline

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By Manish Anand

New Delhi, July 19: Union Minister for External Affairs S Jaishankar on Tuesday briefed leaders of as many as 24 political parties on the prevailing situation in Sri Lanka, with focus on two fronts – political and foreign affairs. In between, subtle message was served to the leaders of political parties that states must mind their finances and rein in their fiscal slippages.

Prime Minister Narendra Modi-led National Democratic Alliance (NDA) government called a meeting of as many as 46 political parties, while eight ministers led by Jaishankar took the lead in briefing the political class after weeks and months of a full-blown Sri Lankan crisis.

The people in Colombo have already forced Gotabaya Rajapaksa to flee and quit from the post of President from abroad through an e-mail to the Parliament’s Speaker Mahinda Yapa Abeywardena. His brother Mahinda Rajapaksa had already been forced out.

Beyond the political and foreign affairs ramifications emerging out of the crisis in Colombo, the Modi government seems seizing up the opportunity to warn the states to mind their fiscal management.

Modi, incidentally, last week also hit out at the politics of freebies, while addressing a rally in Uttar Pradesh after inaugurating the Bundelkhand Expressway.

On Tuesday, during Jaishankar’s briefing with the leaders of the political parties, it was reliably learnt that a presentation was also given on the states’ finances.

It may be recalled that the newly-formed Aam Aadmi Party (AAP) government in Punjab announced the replication of the Delhi scheme of the freebies of free electricity upto 300 units in the state.

Punjab along with Kerala and West Bengal area among India’s heavily indebted states. They regularly plead for the expansion of their borrowing limits.

But the fiscal stress is no more confined to just Punjab, Kerala and West Bengal, as even the highly industrialized states such as Tamil Nadu is also seemingly under the financial pressure.

That may explain the Centre’s urgency to nudge the states to accept the fiscal discipline and learn from the Sri Lankan experience where Gotabaya Rajapaksa had also unleashed limitless populism to win elections.

In this backdrop, it may also be recalled that the Prime Minister’s conference with the chief secretaries in Dharamshala, Himachal Pradesh had laid much emphasis on the financial discipline where presentations were made by the Finance Ministry on the extent of the loans and borrowings of the states and the scale of their mortgaged assets.

Incidentally, the five year statutory compensation by the Centre for any revenue losses under the Goods and Services tax is expiring, which has led to a flurry of demands from the Chief Ministers for the extension of the provision. It’s also in this context that the Chandigarh GST Council meeting brought most of the items, earlier exempted, in the GST net, which has sparked the national furore, which also has affected the functioning of the two Houses of Parliament in the ongoing Monsoon session.