Centre should help States to overcome crisis: Balagopal

The Centre should help the States to overcome the unprecedented socio-economic crisis and economic slowdown caused by the pandemic rather than pushing them into further financial crisis, Finance Minister K.N. Balagopal has said.

“A more healthy relationship is needed between the Centre and the States to overcome the difficult times. In cooperative federalism, the Centre and States share a horizontal relationship, where they cooperate in the larger public interest. The Centre should extend more help to the States financially to meet the pressing demands of the people,” Mr. Balagopal told The Hindu.

Pointing out that the tax rate is arbitrary, the Finance Minister said the average tax rate had come down from 16% to 11.5% in five years of the GST regime. The loss suffered by a consumer State like Kerala is huge and cannot be compensated. The States can decide on taxation of petroleum products and alcohol only. Mr. Balagopal said GST had benefited only corporates and business houses.

“In the GST Council, the position of the Centre prevails over the State. As the Centre decides how much and when, the State Finance Ministers have been turned into distributing agents,” says Mr. Balagopal who wrote a dissent note on the GST Bill while he was the CPI(M) deputy leader and member of the Select Committee in the Rajya Sabha.

Stagnation of revenue receipts, decline of 18% in public revenue, sharp reduction in GST revenue, mounting of GST compensation shortfall, reluctance of Centre in sharing the non-divisible income with the States and strings being attached to raising the borrowing limit were among the challenges, he said.

Though ₹19,524-crore Revenue Deficit Grant has been provided by the 15th Finance Commission for Kerala for 2021-2022 compared to ₹15,300 in 2020-2021, the Minister said the sharable pool had come down from 2.45% to 1.92%.


The Niti Aayog’s 2020 Sustainable Development Goals are also turning detrimental to Kerala which had made advancements in health, education and other sectors.

Kerala was in a “dangerous situation” on the financial front, Mr. Balagopal said, adding that “we are better compared to Rajasthan, Punjab, Uttar Pradesh and Bihar and the situation can be overcome with Centre’s assistance.”

The lockdown has halted all economic activities and mobility, causing hardship to vulnerable categories such as daily earners, elderly people, women and children. “We are trying to overcome this without causing hardship to people and taking care of their health and initiating steps for economic recovery,” he said, listing the announcements in his maiden Budget. The Centre’s free vaccine for all above 18 years had given us a breather.


The Finance Minister has set goals to increase production, make value-added products from fruits and to increase income.

Mr. Balagopal said the government would tighten the belt by going for austerity measures and by plugging tax evasion.

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Printable version | Jul 25, 2021 4:22:23 PM |

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