State Staring at Financial Crisis Due to Reduced GST Funds: Kerala FM

Kerala’s finance minister, K. N. Balagopal, wrote to the union’s finance minister, Nirmala Sitharaman, saying that the state is in financial trouble because it has not yet received the Rs 12,000 crore in GST compensation.

“A reduction in the revenue deficit grant of around Rs 7,000 crore this year and a loss as a result of the suspension of GST compensation of approximately Rs 12,000 crore have both had a significant negative impact on the state’s financial health. Additionally, the Ministry of Finance unilaterally reduced the State’s net borrowing limitations by almost Rs. 4000 crores under the guise of off-budget borrowing. The total amount of financial resources available to the State Government for financing the budget in the current fiscal year will be reduced by Rs 23,000 crore “As stated in his letter dated July 22, Balagopa.

The Kerala finance minister informed Sitharaman that the continuation of welfare programmes for the poor, including housing, education, and health care, was seriously threatened by the financial crisis.

The safety of the socio-economic security system that the state has fought so hard to create over the last few decades would be in peril, he added, unless the realities faced by the state are acknowledged by the Center, particularly in the wake of the Covid pandemic.

“The composition of the financial liabilities of state governments has changed significantly in the last 25 years. The share of loans and advances from the Centre has declined from over 15.8% of all state liabilities in 2005 to 3 percent in 2020. Kerala is no exception to this trend. The outstanding loans and advances from the Centre to Kerala State as a percentage of Kerala State’s total liabilities have reduced from 12.4% in 2005 to 3.3% in 2020.” he declared.

The Kerala finance minister further claimed that the application of Article 293(3) of the Constitution to undermine states’ independence and financial independence was contrary to the stated goal of establishing the net borrowing ceiling for states.