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FinMin gives nod to 11 states to borrow additional Rs 15,721 cr

"11 states.... have achieved the target set by the Ministry of Finance for the capital expenditure in the 1st Quarter of 2021-22. As an incentive, these States have been granted permission by the Department of Expenditure to borrow an additional amount of Rs 15,721 crore," the Ministry said in a statement.

The Ministry said capital expenditure has a high multiplier effect, enhances the future productive capacity of the economy, and results in a higher rate of economic growth.

The Finance Ministry has permitted 11 states to borrow an additional amount of Rs 15,721 crore after these states achieved the capital expenditure target set for the June quarter. These states are Andhra Pradesh, Bihar, Chhattisgarh, Haryana, Kerala, Madhya Pradesh, Manipur, Meghalaya, Nagaland, Rajasthan and Uttarakhand.

“11 states…. have achieved the target set by the Ministry of Finance for the capital expenditure in the 1st Quarter of 2021-22. As an incentive, these States have been granted permission by the Department of Expenditure to borrow an additional amount of Rs 15,721 crore,” the Ministry said in a statement.

The additional open market borrowing permission granted is equivalent to 0.25 per cent of their Gross State Domestic Product (GSDP). Additional financial resources thus made available will help the States in pushing their capital expenditure further.

The Ministry said capital expenditure has a high multiplier effect, enhances the future productive capacity of the economy, and results in a higher rate of economic growth.

Accordingly, out of the net borrowing ceiling (NBC) of 4 per cent of GSDP for the states for 2021-22, 0.50 per cent of GSDP was earmarked for incremental capital expenditure to be incurred by the States during 2021-22. The target for incremental capital expenditure for each state to qualify for this incremental borrowing was fixed by the Department of Expenditure.

To become eligible for incremental borrowing, States were required to achieve at least 15 per cent of the target set for 2021-22 by the end of April-June quarter of 2021-22, 45 per cent by the end of second quarter, 70 per cent by the end of third quarter and 100 per cent by March 31, 2022.

The next review of Capital expenditure of States will be undertaken by the Department of Expenditure in December, 2021. In this round, capital expenditure achieved by the States till September 30, 2021 will be assessed. Third review will be done in March, 2022 on the basis of capital expenditure incurred by the State during the first three quarters of the year 2021-22.

The capital expenditure-linked borrowing ceiling of 0.50 per cent of GSDP will be allowed to those States who will achieve actual capital expenditure of at least 45 per cent of the target by September 30, 2021 or 70 per cent of the target by December 31, 2021. There would be a final review of actual capital expenditure by the States in the month of June, 2022. Any shortfall/deficiency in actual capital expenditure for the year 2021-22 by the State in comparison with the targeted capital expenditure for the year 2021-22, will be adjusted from the borrowing ceiling of the State for the year 2022-23.

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