Chennai: Despite the two options for additional borrowing put forth by the Centre, capital spending may have to be curtailed by the states in FY 2021 by Rs 1 lakh crore to 3.4 lakh crore after taking into account the anticipated shortfalls in GST compensation and Central tax devolution (CTD), finds ICRA.
While offering two borrowing options, the Centre had pegged the GST compensation requirement of the state governments at Rs 3 lakh crore for FY2021 and the expected GST cess collections at Rs 65,000 crore, implying a gap of Rs 2.35 lakh crore.
However, ICRA has projected that the gap between the GST compensation requirement and the cess collections for FY21 will be Rs 2.9 lakh crore, higher than Centre’s estimate of Rs. 2.35 lakh crore.
Analysing both options, ICRA estimates that in the current fiscal year, state governments would see fiscal deficit of a minimum of 4.25 per cent and maximum up to 5.52 per cent of GSDP .