New Delhi | Jagran Business Desk:  The Finance Minister Nirmala Sitharaman, while unveiling the last tranche of the Rs 20 lakh crore economic package, said that the central government has decided to increase borrowing limit of states from existing 3 per cent to 5 per cent of GSDP.

"Centre has decided to increase borrowing limits of states from 3 per cent to 5 per cent of Gross State Domestic Product (GSDP) for 2020-21," Sitharaman was quoted as saying by ANI.

She further added that the states have only borrowed 14 per cent of the limit.   

"States have so far borrowed only 14 per cent of the limit which is authorised to them. 86 per cent of the limit remains unutilised," she added.

This will give states extra resources of Rs 4.28 lakh crore. 

The states net borrowing ceiling for 2020-21 is Rs 6.41 lakh crores, based on 3 per cent of GSDP.

75 per cent thereof was authorised to states in March 2020 itself and timing is left to the states.

In order to promote state-level reforms, part of the borrowing will be linked to specific reforms like increasing job creation through investment and promoting urban development, health and sanitation.

Part of the borrowing will be linked to specific reforms to:

-Ensure sustainability of the additional debt through higher future GSDP and lower deficits

-Promote welfare of migrants and reduce leakage in food distribution

-Increase job creation through investment.

-Safeguard the interests of farmers while making the power sector sustainable

-Promote urban development, health and sanitation.

Reform linkage will be in four areas

-Universalisation of 'One Nation One Ration card'

-Ease of Doing Business

-Power distribution

-Urban local body revenues.

A specific scheme will be notified by the Department of Expenditure on the pattern below:

Unconditional increase of 0.5 per cent

1 per cent in four tranches of 0.25 per cent, with each tranche linked to clearly specified, measurable and feasible reform actions.

Further 0.5 per cent if milestone are achieved in at least three out of four reform areas.

Posted By: James Kuanal