Approval process for additional borrowing by states simplified

New Delhi, June 25 (IANS) The government on Monday simplified the process for granting additional fiscal deficit limit to eligible states over and above the three per cent limit of the state GDP.

An official statement said that from now on, the government will process each proposal independently, as and when it is received, as opposed to the earlier process of bunching all state proposals into a single proposal.

During the NITI Aayog Governing Council meeting held June 17, some states had pointed out that the permission accorded by the Finance Ministry to eligible states was sometimes delayed due to bunching of proposals received from different states at different intervals into one consolidated approval. 

"The government, keeping in view its policy for cooperative federalism, has henceforth decided to simplify the process of approval of such additional borrowing limits requested by states. It will process each proposal along with complete information independently as and when it is received in contrast to the earlier process of bunching all proposals into a single proposal," the statement said.

"It is expected that this will further enhance transparency and predictability in the borrowing calendar and boost capital expenditure in eligible states," it added.

States can borrow up to three per cent of the Gross State Domestic Product (GSDP) and are eligible for flexibility of 0.25 per cent over and above this if their debt-GSDP ratio is less than or equal to 25 per cent in the preceding year.

They are further eligible for an additional borrowing limit of 0.25 per cent of GSDP in a given year for which the borrowing limits are to be fixed if the interest payments are less than or equal to 10 per cent of the revenue receipts in the preceding year, the statement said. 

"The flexibility in availing the additional limit under either of the two options or both will be available to a state only if there is no revenue deficit in the year in which borrowing limits are to be fixed and the immediately preceding year," it added.