Govt borrowing must be reasonable; high debt for GST compensation may hit economy: Fin Secy : 04-11-2020

After the Ministry of Finance released the second tranche of Rs 6,000 crore to states under the special window for meeting the GST compensation cess shortfall, Finance Secretary Ajay Bhushan Pandey said that there has to be a reasonable level of borrowing. Ajay Bhushan Pandey added that if a balanced approach is not taken, the interest burden will increase which would impact the economy, PTI reported. While states such as Kerala, Punjab, West Bengal, Rajasthan, Chhattisgarh, Jharkhand are yet not opted for the proposed borrowing plan, he further said that the Centre will continue to request the opposition-ruled states to opt for the same. 

The finance secretary underlined that while extending the loan, the Centre would take authorisation from states that repayment would be made only from the GST compensation cess which is being collected. Also, the repayment schedule will be set in a way that the collections in cess pool after June 2022 would be enough to repay the interest arising out of borrowing. It is to be noted that the Centre had extended the compensation cess beyond June 2022. 

The finance ministry, on Monday, said that 21 States and 3 Union Territories have so far opted for the Special Window under Option I and the government has facilitated loans of Rs 12,000 crore to date under the special window. The government added that the amount was raised at a weighted average yield of 4.42 per cent and it will be passed on to the states at the same interest rate, which is lower than the cost of borrowings for the states and will thus benefit them. 

Meanwhile, under the borrowing plan, the Centre would borrow Rs 1.10 lakh crore from market.  which is the revenue shortfall on account of GST implementation. The loans have been released to Andhra Pradesh, Assam, Bihar, Goa, Gujarat, Haryana, Himachal Pradesh, Karnataka, Madhya Pradesh, Maharashtra, Meghalaya, Odisha, Tamil Nadu, Tripura, Uttar Pradesh, Uttarakhand. UT of Delhi, Jammu and Kashmir, and Puducherry also received the loans. 

Source : Yimes of India

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