Additional borrowing permission to states

Union Finance Ministry has granted additional borrowing permission to two more states namely Uttar Pradesh and Andhra Pradesh for successfully undertaking reforms in the Public Distribution System (PDS) and Ease of Doing Business.

  • Earlier, Telangana, Andhra Pradesh, Goa, Karnataka and Tripura were granted permission to raise additional financial resources of nine thousand 913 crore rupees through Open Market Borrowings upon successfully meeting the reform conditions of implementation of One Nation, One Ration Card System.
  • In view of the unprecedented COVID-19 pandemic, Finance minister Nirmala Sitharaman had raised the net borrowing limit for state governments from 3% of the gross state domestic product (GSDP) to 5% to make available an additional Rs 4.28 lakh crore to all the states combined.
  • While 0.5 percentage point (pps) of the extra borrowing window is available to all states unconditionally, one per cent of this is subject to implementation of four specific state-level reforms, where weightage of each reform is 0.25 per cent of GSDP.
  • These four reforms include implementation of One Nation, One Ration Card System, Ease of Doing Business reforms, Urban Local body reforms and Power Sector reforms.
  • The balance 0.5 pps can be accessed if milestones are ‘completely achieved’ in at least three out of four reform areas.

(Source: AIR and ET)

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