India’s federal govt and states disagree on borrowing to compensate states

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NEW DELHI, Oct 12 (Reuters) – India’s federal government and some states failed to reach an agreement on Monday on who should borrow funds from the market to compensate the states for their revenue shortfall this year, finance minister said.

“There was no unanimity among the members of the GST council on borrowing,” Nirmala Sitharaman told a news briefing after the meeting.

Last week, the Goods and Services Tax Council, comprising federal and state finance ministers, had extended a surcharge on luxury goods including cars and tobacco products beyond 2022 to help states repay loans raised to meet the revenue shortfall this year.

While 21 states, mainly ruled by the Prime Minister Narendra Modi’s party and its allies have agreed to borrow from the market, about ten opposition-ruled states are insisting that the federal government should borrow and compensate them.

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