The Centre-states confrontation over GST dues is ill-timed. Neither is at fault for the pandemic-induced tax shortfall. The best solution for now is to borrow more and the central government is better placed to do this. The crisis also once again underlines the need to reform the government bond market.
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Rubbish. A cop out of an editorial. Centre must keep its word. Problem is not bond market but a poorly conceived guarantee by Jaitley. Anyone with common sense would have asked the question “how will centre compensate if the economy plummets” before agreeing to 14% compensation of shortfall in states’ revenues. Botched up implementation on several counts for which Jaitley is squarely responsible
BS ? Did you predict Covid19 in 2017
Borrowing more will pose its own problems. GoI has increased its planned borrowings from 4.5 to 12 trillion, a figure which may well be exceeded. The states are being permitted to borrow more, partly due to shortfalls in GST amounts received by them. Both because collections are down and GoI is unable to stand by the 14% buoyancy pledge. Interest rates will harden. Public debt levels for Centre and states are in unsustainable territory already. Households, whose savings ultimately translate into government borrowings, are saving less, struggling to sustain basic consumption. Challenges that would have overwhelmed a more gifted economic team.