Balagopal terms Union Budget "disappointing", condemns silence on GST compensation extension

No use in bringing petrol, diesel under GST, says Balagopal; seeks extension of compensation regime

Kerala Finance minister K N Balagopal has termed the Union Budget 2022-23 "hugely disappointing" and said it was too inadequate to tide over the crisis precipitated by the ongoing pandemic.

Balagopal said that there was nothing in the Budget for Kerala. "There was no mention of K-Rail or our longstanding demand for an AIIMS (All India Institute of Medical Sciences)," he said minutes after Union finance minister Nirmala Sitharaman wound up her Budget presentation on Tuesday.

The most objectionable aspect of the Budget, the minister said, was its silence about extending the GST compensation for the next five years.

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The GST compensation granted by the Centre to the states if they had not achieved a certain level of annual growth in GST collections would end on June 30 this year. "Not just Kerala, all states have put forward the demand," Balagopal said. "This was a policy decision that should have been laid down in the Budget," he added. He said Kerala alone would stand to lose over Rs 3000 crore annually if the compensation ends.

Balagopal was also not enthusiastic about the financial assistance rolled out in the Budget for states. Sitharaman had made it sound so momentous that she repeated this declaration twice.

"The ‘Scheme for Financial Assistance to States for Capital Investment’ has been extremely well received by the states. In deference to the requests received during my meeting with Chief Ministers and state Finance Ministers, the outlay for this scheme is being enhanced from Rs 10,000 crore in the Budget Estimates to Rs 15,000 crore in the Revised Estimates for the current year," she said in her speech.

"For 2022-23, the allocation is Rs 1 lakh crore to assist the states in catalysing overall investments in the economy," she said. What's more, these fifty-year interest-free loans are over and above the normal borrowings allowed to the states.

Balagopal was dismissive. "At the most, Kerala would receive around Rs 2000 crore. This is far less than what we would lose when GST compensation ends this year," the finance minister said. "Moreover, Rs one-lakh crore is not enough to revive the pandemic-hit economy of the states. The centre has to spend considerably more," Balagopal said.

The Budget declaration that states will be allowed a fiscal deficit of 4% of GSDP was also seen as a let down by Balagopal. "This ongoing fiscal we were allowed 4% and now our fiscal space has been further restricted to 3.5%," Balagopal said. Of the 4% allowed for 2022-23 fiscal, 0.5% is tied to power sector reforms, for which Kerala does not qualify. In effect, the fiscal space would be 3.5%. Last fiscal, the fiscal space was 4.5%, 0.5% of this tied to power sector reforms. Therefore, Kerala's fiscal space during 2021-22 was 4%.

Balagopal said the Budget's claim about helping the cooperative sector was a sham. "It says the minimum alternate tax for cooperatives has been brought down to 15% from 18.5%. But what we need to realise is that there was no such tax for the cooperatives in the first place. They had introduced it and now they are trying to rationalise it by bringing it to the level at which companies are paying (15%)," Balagopal said.

He said the Union Budget was a disappointment in relation to schemes for job creation. "We expected measures for job creation. That has not happened," the finance minister said.

He said there was no scheme to provide jobs for the underprivileged in the urban sector even though nearly 50% of the country's population lived in urban areas. The allocation for the Mahatma Gandhi National Rural Employment Guarantee Scheme has also fallen considerably. This time it is only Rs 73,000 crore. "This ongoing fiscal, the MGNREGA outgo has already crossed Rs 98,000 crore. And during 2019-20 fiscal, it was Rs 1.10 lakh crore," he said.

Balagopal said the union finance minister sought to create the impression that she was being highly generous to the agriculture sector. "She had announced Rs 2.37 crore for procurement from farmers at the minimum support price. But last time, the amount was Rs 2.47 crore," he said. The farmers' subsidy, too, has come down, from Rs 4.6 lakh crore to Rs 1.4 lakh crore this time.

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