Centre already extended support to State Governments - FM Sitharaman
Centre already extended support to State Governments - FM Sitharaman

Centre already extended support to State Governments – FM Sitharaman

  • Centre, like the states, has faced a sharp decline in revenues
  • Despite this the Centre has consistently extended generous support to states in this hour of need.
  • Devolution of taxes (Rs 46,038 cr) in April was given fully as if Budget Estimates were valid, even though actual revenue shows unprecedented decline from Budget Estimates.
  • Revenue Deficit Grants to states (Rs 12,390 cr) given on time in April and May, despite Centre’s stressed resources.
  • Advance release of SDRF (Rs. 11,092 cr) funds in first week of April
  • Release of over Rs. 4,113 crores from Health Ministry for direct anti-Covid activities
  • At Centre’s request, RBI has increased
  • Ways & Means Advance limits of States by 60%
  • Number of days state can be in continuous overdraft from 14 days to 21 days
  • Number of days state can be in overdraft in a quarter from 32 to 50 days.

Supporting State Governments-

  • States net borrowing ceiling for 2020-21 is Rs. 6.41 lakh crores, based on 3% of Gross State Domestic Product (GSDP).
  • 75% thereof was authorised to them in March 2020 itself and timing is left to the States
    States have so far borrowed only 14% of the limit authorised. 86% of the authorised borrowing remains unutilized.
  • Nevertheless, states have been asking for special increase in borrowing from 3% to 5%
  • In view of the unprecedented situation, Centre has decided to accede to the request and increase borrowing limits of States from 3% to 5%, for 2020-21 only.
  • This will give States extra resources of Rs. 4.28 lakh crores.

Supporting State Governments & promoting state level reforms-

  • Part of the borrowing will be linked to specific reforms (including recommendations of Finance Commission) to:
  • ensure sustainability of the additional debt through higher future GSDP growth 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, and
  • 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 and Urban local body revenues.
  • A specific scheme will be notified by Department of Expenditureon the following pattern:
  • Unconditional increase of 0.50%
  • 1% in 4 tranches of 0.25%, with each tranche linked to clearly specified, measurable and feasible reform actions
  • Further 0.50%if milestones are achieved in at leastthree out of four reform areas.

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