FM Sitharaman hikes states' borrowing limit to 5%, arms them with extra Rs 4.28 lakh crore

Finance Minister Nirmala Sitharaman on Sunday announced that the Centre has increased the special borrowing limits for the states from 3% to 5% for the year 2020-2021. This special borrowing limit will give the states extra resources of Rs.4.28 Lakh crore. This decision comes after the states had made a special request to the Centre to increase their borrowing limits from Gross state domestic product (GSDP) as they facing a sharp decline in their revenues.

The states have been asking for a special increase in borrowing hence during this unprecedented situation and the Centre has decided to oblige the request and increase the borrowing limits of the states from 3% to 5% for 2020-2021. 

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Sitharaman further informed that the States net borrowing ceiling for 2020-21 is Rs. 6.4 lakh crores, based on 3% of the Gross state domestic product (GSDP). The states were authorised to use 75% of the GSDP in the month of March however the states only borrowed 14% from the authorised limit and still has 86% of the unutilized borrowings.

She further informed that the Centre government has consistently extended generous support to states in this need of the hour situation. Devolution of taxes Rs. 46,038 cr was fully given in April. Along with revenue deficit grants to the state of Rs. 12.390 cr was given on time. 

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Initiatives and reforms announced by FM earlier

The Finance Minister on Saturday said that the central government will introduce competition, transparency and private sector participation in the coal sector and will do infrastructure development of Rs 50,000 crore.

Earlier on Friday, FM Sitharaman announced Rs 1 lakh crore Agri Infrastructure Fund for farm gate infrastructure for farmers and Rs 10,000 crore scheme for the formalisation of Micro Food Enterprises (MFEs) under the Rs 20 lakh crore stimulus package. She also proposed amendments to the Essential Commodities Act to enable better price realisation for farmers and said no stock limit should apply to processors or value chain participants.

On Thursday, the Finance Minister announced the 'One Nation One Ration Card', free food grain supply to migrants and creation of affordable rental housing complexes (ARHC) in urban areas for migrant workers and poor under the COVID-19 stimulus package. The announcements came after the Prime Minister on Tuesday announced the economic package for the country to become 'self-reliant' and deal with COVID-19 crisis.

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