A three-week nationwide lockdown is testing the resilience of state governments, with analysts warning that essential public services and health care for millions of Indians will be in jeopardy without further central government and RBI support. States are slashing salaries, demanding an increase in borrowing limits and asking for fund transfers from Centre as their tax revenues dry up due to large scale travel restrictions to contain the spread of the flu-like respiratory disease.

The Reserve Bank of India (RBI) has already raised short-term borrowing limits to help tide over the funding crunch, but more outright support from the central bank is going to be critical, analysts said.

“States revenues are unlikely to be adequate in the current circumstances so this is where the RBI will have to step in much more aggressively,” said Upasna Bhardwaj, senior economist at Kotak Mahindra Bank.

“And not just through open market purchases of government securities but possibly state development loans as well,” she added, citing a need for some amount of direct monetisation of the central government’s deficit too.

The finances of states have historically been in disarray barring a few well-managed ones, but the lockdown of people and goods across Asia’s third-largest economy has hit tax revenues from fuel to stamp duties.

India has so far identified 4,421 coronavirus cases, of which 114 have died.