Good news for state govt: Centre increases states' borrowing limits from 3% to 5% for FY2020-21
Good news for state govt: Centre increases states' borrowing limits from 3% to 5% for FY2020-21

Union Finance Minister Nirmala Sitharaman on Sunday said that the Centre has now increased the states borrowing limit from 3% to 5% for the Financial Year 2020-21.

Nirmala Sitharaman said that the States have so far borrowed only 14 percent of the limit which is authorised to them and 86 percent of the limit still remains unutilised. Several State government had requested that the Centre releases more funds to tackle the coronavirus crisis.

"However, Centre has decided to increase borrowing limits of states from 3 percent to 5 percent of Gross State Domestic Product (GSDP) for 2020-21."

With this, the Centre will provide States extra resources worth Rs. 4.28 lakh crore.

Further, Sitharaman said that Centre, like the states, has faced a sharp decline in revenues and despite this the Centre has consistently extended generous support to states in this hour of need.

Devolution of taxes worth Rs 46,038 crore in April was given fully even though actual revenue shows unprecedented decline from Budget Estimates.

She said that the Revenue Deficit Grants to states worth Rs 12,390 crore was given on time in April and May, despite Centre's stressed resources

Advance release of SDRF funds worth Rs. 11,092 crore in first week of April was also done, she added.

At Centre's request, RBI has increased Ways & Means Advance limits of States by 60%.

In addition to this number of days state can be in continuous overdraft from 14 days to 21 days has now been increased to quarter from 32 to 50 days in a quarter.

On Sunday, Sitharaman announcing the last tranche of the economic package, said that today 7 measures will be announced. This includes MNREGA scheme, Rural and urban health and education, businesses, decriminalization of Companies Act, ease of doing businesses and COVID-19, public sector enterprises-related and state government and resources for state government.

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