States would be eligible for another 0.25% borrowing limit in a given year if their interest payments are less than or equal to 10% of revenue receipts in the preceding year.
Following representations from various state governments, the Centre on Monday simplified processes to give speedy approval to individual state’s plan to borrow up to 0.5% of its gross state domestic product (GSDP) over and above its 3% annual fiscal deficit limit.
It is expected that this procedural change would enhance transparency and predictability in the borrowing calendar and boost capital expenditure in eligible states, the finance ministry said in a statement.
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As per the recommendation of the 14th Finance Commission, the states would be eligible for an additional borrowing window of 0.25% of the GSDP in a given year if their debt-GSDP ratio is less than or equal to 25% in the preceding year. States would be eligible for another 0.25% borrowing limit in a given year if their interest payments are less than or equal to 10% of revenue receipts in the preceding year.