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Karnataka: Covid mismanagement responsible for economic crisis
Siddaramaiah
Fiscal Responsibility Budget Management (FRBM) Act, 2002 was enacted to bring in financial discipline in the State and Central governments. It mandated revenue surplus, fiscal deficit below 3 per cent of Gross State Domestic Product (GSDP) and total debt below 25 per cent of GSDP for states
Bengaluru: Mismanagement by the state government and the impact of COVID-19 are responsible for the economic crisis in the state, said leader of the Opposition Siddaramaiah on Friday.
He said the Fiscal Responsibility Budget Management Act, 2002 was enacted to bring in financial discipline in the State and Central governments.
Taking it to Twitter, Siddaramaiah said, "Fiscal Responsibility Budget Management (FRBM) Act, 2002 was enacted to bring in financial discipline in the State and Central governments. It mandated revenue surplus, fiscal deficit below 3 per cent of Gross State Domestic Product (GSDP) and total debt below 25 per cent of GSDP for states."
"Karnataka is facing an economic crisis due to both mismanagement by Karnataka BJP and the impact of COVID-19. Budget estimates are no longer applicable and the government has to adopt prudent fiscal measures," added Siddaramaiah.
"However, Section 4(3) of the FRBM Act allows the government to deviate from deficit targets under certain circumstances. The Central government has, under this escape clause, allowed states to increase the fiscal deficit from 3 per cent to 5 per cent only if the states choose their Option one Goods and Services Tax (GST) compensation plan," he said. The Centre had given two options for compensating states on GST to bridge revenue shortfall as the economy faces a prospect of contraction in the current fiscal year due to COVID-19 crisis.
The first option provides a special window to states in consultation with the Reserve Bank of India (RBI) to provide Rs 97,000 crore at a reasonable rate of interest. This money can then be repaid after five years from the collection of cess.
The second option is that the entire GST compensation gap of Rs 2.35 lakh of this year can be met by states in consultation with the RBI.
To this, Siddaramaiah, in a subsequent tweet, said, "There are two issues with respect to the option 1 of GST compensation plan which is accepted by Chief Minister BS Yediyurappa. One is reckless relaxation of fiscal deficit targets and the other is the immoral transfer of burden on the states."
The leader said that the Centre should honour their promise in accordance with GST compensation act.
"The Central government should honour their promise to pay GST compensation, in accordance with the GST compensation act. The projected GST compensation to all the states is Rs 2,35,000 crore and Rs 30,000 crore to Karnataka till January 2021," he said.
He also urged the MPs of BJP Karnataka to demand the state's share and if not, Siddaramaiah said, "We are ready to demand our share".
