SBI Research: Finding Ways To Support States Tide Over Rs Three Lakh Revenue Shortfall From GST
File photo of Finance Minister Nirmala Sitharaman. (Photo: PTI)

SBI Research: Finding Ways To Support States Tide Over Rs Three Lakh Revenue Shortfall From GST

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BQ Blue’s special research section collates quality and in-depth equity and economy research reports from across India’s top brokerages. These reports offer BloombergQuint’s subscribers an opportunity to expand their understanding of companies, sectors and the economy.

SBI Research Report

The Government has given option to state governments to borrow as much as Rs 2.35 lakh crore in the form of borrowings, over and above Rs 4.28 lakh crore allowed to states under Atmanirbhar package. However, Article 293 (3) of the Indian Constitution imposes certain restrictions on the borrowings by the state governments.

The Article stipulates that a state may not, without the consent of the Government of India, raise any borrowings if it has any loan outstanding, which is repayable to the Government of India.

Furthermore, under the Constitution, State Governments, unlike the centre, cannot borrow externally.

The centre plays the role of an intermediary in the transfer of external borrowings to States.

We propose three options of how states meet the shortfall-

1.The first option is the Reserve Bank of India monetizes state debt,

2. The next option in borrowing could be a review and enlargement of ways and means advances (WMA)

3. The third option is recourse to National Small Savings Fund (NSSF).

Click on the attachment to read the full report:

SBI Ecowrap Finding ways to support states tide over Rs. 3 lakh revenue shortfall from GST.pdf

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