The unexpected lockdown which further led to the corona crisis in the country indeed shattered the Modi-led government’s big and bright ‘Mission 2020’ dreams. The Indian economy in specific has shrunk faster than any other major nation. As many as 200 million people could slip back into poverty.
Economists and global institutions like the Asian Development Bank have recently cut India’s growth projections from already historic lows as India emerged as a new global hotspot for the coronavirus pandemic.
Meanwhile, GST collections including compensation cess to the states had been falling short of targets even before the coronavirus pandemic, making it difficult for the centre to compensate the states.
In the wake of which, as many as 21 states, mostly ruled by BJP or parties levelled up making a crucial decision amid the crisis. Going with ‘option 1’, the 21 states chose to borrow the tax collection shortfall due to the switch to the GST, estimated at ₹ 97,000 crore, by issuing debt under a special window coordinated by the Finance Ministry.
Andhra Pradesh, Arunachal Pradesh, Assam, Bihar, Goa, Gujarat, Haryana, Himachal Pradesh, Jammu & Kashmir, Karnataka, Madhya Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Odisha, Puducherry, Sikkim, Tripura, Uttarakhand and Uttar Pradesh are the states which have opted for borrowing Rs 97,000 crore.
On the other hand, the state governments of Jharkhand, Kerala, Maharashtra, Delhi, Punjab, Rajasthan, Tamil Nadu, Telangana, and West Bengal have rejected both options, and have sought the Prime Minister’s intervention.
It can be noted that if the remaining states do not give their choices before another scheduled meet of the GST Council on October 5, then they will have to wait till June 2022 to get their dues while “option 2” allows states to borrow the entire compensation shortfall of ₹ 2.35 lakh crore.