| (The Editor's Pick is a new newsletter from The Hindu that provides a snapshot of the most important stories from today's edition of our newspaper, along with a note from our top editors on why we chose to give prominence to these stories.) Kerala is now speaking of cobbling together an alliance against the Centre over GST compensation. It says that the Centre has betrayed the States by making them borrow to fill the massive GST revenue gap this year. It is asking the Centre to borrow and distribute to the States rather than put the burden of the debt on the latter. The Centre has suggested two options for States to decide from in the next few days: either borrow Rs. 97,000 crore under an RBI special window or borrow Rs.2.35 lakh crore from the markets. However, a State is allowed to borrow only up to 3% of its income; and it is not enough to manage Kerala's shortfall, even with the 0.5 % relaxation offered by the Centre. The Centre claims that it is constitutionally required to compensate States only for losses resulting from GST implementation -- which is the Rs.97,000 crore in the first option. It has offered several cushions for borrowing under this option, but Kerala says that it will still be a financial loss to the States.The Centre's argument is that if it borrows such an amount, it will have a negative implication for yields on Central government securities, which has other macro economic implications and could also affect the private sector. In his letter to the States, the Union Finance Secretary said that "it is in the interest of the nation" that the borrowing happens at the State level and not at the Centre. If Kerala is able to put together an alliance of States that pushes back against both options, then the Centre-State tussle exacerbates. This has both political and economic implications, which is what makes this story relevant. | 
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