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'Remove conditions for higher state borrowings': Chhattisgarh CM tells FM Sitharaman

The Centre has allowed the states to increase their borrowing limit from 3% of the GSDP to 5% on fulfillment of certain conditions

twitter-logoDipak Mondal | June 9, 2020 | Updated 10:51 IST
'Remove conditions for higher state borrowings': Chhattisgarh CM tells FM Sitharaman
While the states can borrow up to 3.5%, or around Rs 7.5 lakh crore without any condition, the next 150 bps of the borrowing limit comes with conditions

Chhattisgarh Chief Minister Bhupesh Baghel has written to Union Finance Minister Nirmala Sitharaman requesting her to reconsider the Centre's decision to link the increased borrowing limit of states to specific reforms and allow the states to enhance their resources during the COVID-19 crisis without any conditions.

The chief minister in his letter to the finance minister has said the state has not been able to avail the additional borrowing limit of 2% of the Gross State Domestic Product (GSDP) due to non-fulfillment of conditions and norms. He demanded that states be allowed to avail the additional borrowing limit of 2% without any conditions.

The Centre has allowed the states to increase their borrowing limit from 3% of the GSDP to 5% on fulfillment of certain conditions. Baghel said that the problem of scarcity of resource remains unchanged for the states, and the responsibility of the state government has increased even more as economic packages announced by the Centre to deal with the situation arising due to coronavirus crisis and nationwide lockdown are also insufficient to revive the economy and meet the needs of the common people.

He further wrote that in view of the present crisis it is the states priority to provide free food grains to the poor families, regular salary to the salaried people and proper health facilities for all. "To provide relief to the people of the state, it is necessary to take prompt and effective action in this direction along with additional financial resources," he says.

Even though the Centre has accepted the states' demand for an increased borrowing limit of 5% against 3% for the current financial year, it has put conditions on the states to avail the higher borrowing limit. While the states can borrow up to 3.5%, or around Rs 7.5 lakh crore without any condition, the next 150 bps of the borrowing limit comes with conditions.

After 3.5% of the GSDP, the next 100 bps of the borrowing has to be linked to 'clearly specified, measurable and feasible reform actions'. These reforms are -- universalisation of 'One Nation One Ration Card', improvement of ease of doing business, power distribution and urban local body revenues. The next 50 bps of the borrowing will depend on achievement of three of the four reforms mentioned above.

Also read: Economic impact of coronavirus worse than 2008 financial crisis: Tech Mahindra CEO CP Gurnani

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