Centre to borrow Rs 1.1 lakh cr for GST compensation cess shortfall
The Union government will borrow around Rs 1.1 lakh crore in tranches under a special window for lending to states in place of the GST compensation cess.
 
A Finance Ministry statement on Thursday said that the move will not have any impact on the fiscal deficit of the government of India. The amounts will be reflected as the capital receipts of the state governments and as part of financing of respective fiscal deficits.
 
Under Option-I for the borrowing in place of the GST compensation cess, states were to be provided a Special Window of borrowing of Rs 1.1 lakh crore, and over and above that, an authorisation for additional Open Market Borrowings (OMB) of 0.5 per cent of their GSDP.
 
The authorisation for increased OMBs of 0.5 per cent of GSDP has been issued by Ministry of Finance on October 13 and are in relaxation of the reform conditions that were stipulated for eligibility.
 
Additionally, under option-I, states are also eligible to carry forward their unutilised borrowing space to the next financial year, it said.
 
"Under the Special Window, the estimated shortfall of Rs 1.1 lakh crore (assuming all states join) will be borrowed by Government of India in appropriate tranches," said the statement.
 
The amount so borrowed will be passed on to the states as a back-to-back loan in lieu of GST compensation cess releases.
 
This will avoid differential rates of interest that individual states may be charged for their respective State Development Loans (SDLs) and will be an administratively easier arrangement.
 
It may also be clarified that the General government (States + Centre) borrowings will not increase by this step. The states that get the benefit from the Special Window are likely to borrow a considerably lesser amount from the additional borrowing facility of 2 per cent of GSDP (from 3-5 per cent) under the 'Aatmanirbhar Bharat' package.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
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    India's FY21 GDP outlook worsens, IMF sees 10.3% contraction
    With the coronavirus pandemic still to be contained and the central government's stimulus measures having limited impact on economic activities and consumer demand, the outlook for the Indian economy for the current financial year has only worsened.
     
    In its latest global outlook, the International Monetary Fund (IMF) predicts that India's GDP will contract by 10.3 per cent in the 2020-21 fiscal. This is a downward revision of its previous estimate of 5.8 per cent.
     
    The outlook for the next financial year (2021-22), however, has improved. The IMF now estimates an 8.8 per cent growth in the country's GDP in FY22, higher than the previous estimate of 2.8 per cent.
     
    Noting that all emerging market and developing economy regions are expected to contract this year, IMF's World Economic Outlook said: "Revisions to the forecast are particularly large for India, where GDP contracted much more severely than expected in the second quarter. As a result, the economy is projected to contract by 10.3 per cent in 2020, before rebounding by 8.8 per cent in 2021."
     
    Global economy is now projected to contract 4.4 per cent in 2020, as per IMF's latest estimate.
     
    In her foreword to the World Economic Outlook, IMF Chief Economist Gita Gopinath noted that preventing further setbacks to the global economy will require that policy support is not prematurely withdrawn.
     
    "The path ahead will require skilful domestic policies that manage trade-offs between lifting near-term activity and addressing medium-term challenges," she said.
     
    Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
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    Conditional fiscal stimulus at minimal 0.2% of GDP: SBI Ecowrap
    The latest stimulus measures announced by the Centre will lead to a maximum additional cash outgo of Rs 40,000 crore, which is around 0.21 per cent of the GDP during the current fiscal, an SBI Ecowrap report estimated on Tuesday.
     
    In comparison, the last stimulus package had a cash outgo of Rs 2 lakh core or around 1 per cent of the GDP.
     
    The measures introduced under the Rs 73,000 crore package provides for 'LTC Cash Voucher Scheme', 'Festive Advance' and loans to state governments to spend as capital expenditure.
     
    As per the report, the Centre has proposed a special interest free 50-year loan to the states for capital expenditure of Rs 12,000 crore to be spent till March 2021.
     
    Out of the total, Rs 10,000 crore will be provided to all the states and Rs 2,000 crore to states which meet at least three out of four reforms given in the 'Aatmanirbhar' fiscal deficit package.
     
    "Though we welcome this step, we believe that Rs 12,000 crore is minimal given the fact that this amount is only 1.6 per cent of the FY21 budget estimates of capital expenditure of select 18 states.
     
    "This number will reduce further if we add the capex projections of all the other states. Regarding the extra Rs 2,000 crore, we believe that only a few states will be eligible for this amount. We believe only around 10-15 per cent employees would use the LTC scheme," the report said.
     
    In case of festival advance, the report said that assuming that it is taken in November and since it is to be returned in maximum of 10 instalments, four instalments will be paid back in this fiscal, thus leaving a burden of Rs 2,400 crore to the exchequer.
     
    "Further capital expenditure will lead to Rs 25,000 crore cash outgo for the Centre's budget allocation and Rs 12,000 crore loan for states.
     
    "Taking all these into account, Rs 40,000 crore is the maximum additional cash outgo of the Centre during the current fiscal, which is around 0.21 per cent of GDP... Let us hope these new measures are not a case of too little too late," the report said.
     
    Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
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