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Last Updated Saturday March 24 2018 07:20 PM IST

Isaac in confession mode: excessive borrowing spurred fin crisis

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Thomas Isaac Kerala struggled with an intense finance crunch for last three months, which was being blamed on the reduced tax earnings and lack of central compensation.

Thiruvananthapuram: The government has finally admitted that the state is facing severe financial crisis due to excessive borrowing. Until now, the refrain was that the income from GST has reduced and the compensation from the Centre has been delayed.

Now, finance minister Thomas Isaac, in a Facebook post on December 29, has admitted that the crisis is a result of restrictions imposed on borrowings by the Centre due to continuous borrowing through the treasury.

He also added that this fact was not revealed until now. His post reads, "The central government's stand is that Kerala has borrowed Rs6,000 crore in excess through treasury savings bank last year. Hence, the Centre has reduced Rs 6,000 crore from the approved Rs 20,000 crore borrowing limit this year.

Kerala had already borrowed Rs 14,000 crore in the period till Onam. "So, the borrowing limit has already reached. The issue was kept concealed to avoid financial insecurity among the public,” he wrote.

The minister ended the post saying that the growth in GST collection was growing at 10% while the expenses were shooting up at 15-16% creating a negative balance.

No one understood the reason behind the financial crunch. From August to November, the state government received Rs 7,000 crore in GST income.

The Centre had provided Rs 1,200 crore to offset the loss in tax generation due to the implementation of the goods and services tax. In fact, though the GST earnings have come down, the Centre has compensated the state in excess.

However, the delay in disbursement of this funds has added to the the financial problems of the state. The issue, which the state could have tackled by cutting expenses and raising other incomes, was till now cited as the main reason for the severe crisis facing the state.

Read more at business news

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