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No restrictions on utilisation of additional borrowing by states, says official; to get extra resources of Rs 4.28 lakh cr – Firstpost


New Delhi: The Centre has not imposed any restrictions on states for utilisation of additional borrowing of 2 p.c and they’re free to spend as per their necessities, a senior Finance Ministry official has mentioned.

It is to be famous that the essential restrict of three p.c stays unconditional, whereas solely additional one per cent out of the 2 is linked to citizen centric reforms, the official mentioned.

Representational picture. Reuters

Finance Minister Nirmala Sitharaman whereas asserting this on Sunday had mentioned that a rise in borrowing limits can be topic to states taking citizen centric reforms, that are geared toward bettering high quality of service supply to the general public.

In order to assist states to improve their useful resource base in occasions of the COVID-19 disaster, the Central authorities allowed them to go in for additional borrowing of 2 p.c, over and above the common restrict of three p.c of the GSDP, topic to sure situations.

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“…the basic limit of 3 percent remains unconditional. Out of the additional borrowing of 2 percent of GSDP, 0.50 percent is untied and 1 percent is subject to undertaking certain reforms by the state governments (0.25 percent for each reform). Further, additional 0.50 percent is allowed on undertaking at least any 3 suggested reforms,” the official mentioned.

It could also be famous that, whereas the eligibility for half of the additional borrowing is conditional, its utilisation is absolutely untied. The reforms instructed by the Central authorities are citizen centric and goals at rising the standard of service supply to the general public, the official added.

These reforms are — implementation of one nation one ration card system; district degree and licensing reforms for ease of doing enterprise; strengthening native our bodies; and energy sector reforms.

The additional borrowing will present states extra resources of Rs 4.28 lakh crore to cope with COVID-19 disaster.

States’ internet borrowing ceiling for 2020-21 is Rs 6.41 lakh crore (three p.c of gross state home product).

Updated Date: May 21, 2020 19:59:30 IST

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