Months after maintaining that it is the states who should borrow to bridge the shortfall in their GST compensation cess kitty, the centre has finally retracted. The finance ministry has said that the centre would be borrowing the Rs 1.1 lakh crore on behalf of states and would be passing it on to them as back-to-back-loans. The centre has said the borrowings would not impact the fiscal math, as it would be reflected as capital receipts on state government's books.
Thomas Isaac, Finance Minister, Kerala said, “The central government will borrow and pass it on to the states, and then it will be reflected in their fiscal deficit of the states not of the centre because it is a back to back loan transfer that takes place that is fine and acceptable.”
“My play is since it is not going to be reflected in the central government’s fiscal deficit why don’t you borrow this entire amount, Rs 1.7 lakh core and make it available. If not then let us discuss how much can be borrowed.”
Manish Sisodia, Deputy CM, Delhi said, “Delhi's position is clear, going back on compensation issue is unconstitutional. If the centre agreed to borrow first, we wouldn't have had this controversy.”To know more, watch the video.