Economy News

Central Government to borrow Rs.1.1 Lakh Crore – For GST Compensation Shortfall

The centre has decided to borrow Rs 1.1 lakh crore to meet the GST compensation shortfall to the states. They gave the raised amount as back to back loans to the states in the place of the GST payments.

They have decided that the central government will borrow and not the states because the genre can get the loan at least 50 basis points cheaper than the states.

The senior official ordered RBI assured to manage the centre’s borrowing in the best manner possible.

They take the strict move urgently, and also the norms. This was a tweak because many states urgently needed funds.

Dissenting states faced the threat of legal challenge. Genre faced challenges because the funds were not disbursed on an urgent basis.

The central government was climbing down from its earlier position. This was because of the decision for the Centre to borrow instead of states and then provide back-to-back loans to states.

But it will technically have no impact on the Centre’s fiscal deficit as the amounts reflected as capital receipts of state governments and as part of the financing of its respective fiscal deficits.

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