Ministry of Finance has granted permission to eleven states including Nagaland to borrow an additional amount of Rs. 15,721 crore as an incentive for achieving the target set by the Ministry for the capital expenditure in the 1st Quarter of 2021-22.
The eleven states include Andhra Pradesh, Bihar, Chhattisgarh, Haryana, Kerala, Madhya Pradesh, Manipur, Meghalaya, Nagaland, Rajasthan and Uttarakhand.
The additional open market borrowing permission granted is equivalent to 0.25 percent of their Gross State Domestic Product (GSDP). Additional financial resources thus made available would help the States in pushing their capital expenditure further. The 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 of 4% of GSDP for the States for 2021-22, 0.50 percent of GSDP was earmarked for incremental capital expenditure to be incurred by States during 2021-22. The target for incremental capital expenditure for each state to qualify for this incremental borrowing was fixed by department of expenditure.
To become eligible for incremental borrowing, the ministry said the states were required to achieve at least 15 percent of the target set for 2021-22 by the end of 1st quarter of 2021-22, 45 percent by the end of 2nd quarter, 70 percent by the end of 3rd quarter and 100 percent by March 31, 2022.
Next review of Capital expenditure of States would be undertaken by department of expenditure in December, 2021. In this round, capital expenditure achieved by the States till September 30, 2021 would be assessed.
Third review would be done in March, 2022. The capital expenditure-linked borrowing ceiling of 0.50 percent of GSDP would be allowed to those States, which would achieve actual capital expenditure of at least 45 percent of the target by September 30, 2021 or 70 percent of the target by December 31, 2021.