Mumbai: State Bank of India has issued a warning against giving away things for free, claiming that doing so has high fiscal costs and leads to inefficiencies because it distorts prices and improperly allocates resources.
The annual pension liabilities of Chhattisgarh, Jharkhand, and Rajasthan are expected to be 3 lakh crore rupees, according to Soumya Kanti Ghosh, chief economist at SBI, using just three states as an example. In its economic analysis, SBI recommended that the Supreme Court-led panel set a cap on these social programmes at 1% of the state’s GDP or 1% of its own tax revenue.
According to the report, the pension liabilities for Jharkhand, Rajasthan, and Chhattisgarh are 217 percent, 190 percent, and 207 percent, respectively, of these governments’ own tax collections. The off-budget borrowings of states, which are loans raised by state-owned entities and guaranteed by the states, were also noted in the SBI study. These loans are expected to have amounted to almost 4.5 percent of GDP in 2022. If freebies and contingent liabilities are added together, the cumulative amount for all the states equals about 10% of the GSDP.