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Business News/ News / India/  States need legroom to raise development finance: Kerala FM
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States need legroom to raise development finance: Kerala FM

The remark comes at a time when the CAG has questioned the external borrowings by the state’s KIIFB

States have limited scope for boosting revenue, said Isaac (Mint)Premium
States have limited scope for boosting revenue, said Isaac (Mint)

NEW DELHI : States need more options to raise development finance because increasing taxes on petrol or diesel is not an option as central taxes on auto fuel are already high, Kerala’s finance minister Thomas Isaac said on Monday.

States have given up their sovereignty on most indirect tax options with the introduction of the goods and services tax (GST), and have limited scope for boosting revenue other than expecting the economy to grow, for which investments have to be stepped up, the minister said during a virtual media interaction.

Isaac’s emphasis on a liberal regime for fund raising at the sub-national level comes at a time when the Comptroller and Auditor General (CAG) of India has questioned the rupee-denominated external borrowings by Kerala Infrastructure Investment Fund Board (KIIFB), the primary agency for financing large and critical infrastructure projects in the state. The CAG report will soon be tabled in the Assembly.

The CAG pointed out that some of KIIFB’s borrowings were not just contingent liabilities, but direct liabilities, and should be part of the state’s sovereign borrowing and not reporting it was unconstitutional, the minister said. KIIFB issued rupee-denominated bonds abroad only with the Reserve Bank of India’s clearance and even the Centre’s off-budget borrowings are not regarded as unconstitutional, the minister pointed out.

Sovereign borrowing is legally distinct from borrowing by state entities, such as corporations, with or without sovereign guarantees, but the CAG combines the two, he said.

The state has to step up investment to boost growth without compromising on transparency or putting undue and unpayable liability on the state government, the minister said.

“If all states take this course, investment in India can be raised practically to 40% of gross domestic product, something which China did to achieve astronomical growth and world dominance. We are clear we want to raise our investments very substantially," he said.

Off-budget borrowing and public-private partnerships are part of the strategy, Isaac said.

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ABOUT THE AUTHOR
Gireesh Chandra Prasad
Gireesh has over 22 years of experience in business journalism covering diverse aspects of the economy, including finance, taxation, energy, aviation, corporate and bankruptcy laws, accounting and auditing.
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Published: 30 Nov 2020, 05:56 PM IST
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