Finance Ministry (Image: PTI)
Eleven states - including Andhra Pradesh, Uttarakhand, Bihar, Haryana and Kerala - have been given permission by the Finance Ministry to borrow an additional Rs 15,721 crore from the bond market after they met their capital expenditure targets for April-June 2021-22 quarter set by the Centre.
"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 will help the States in pushing their capital expenditure further," said the Finance Ministry in a statement on September 14.
The other states which have been allowed to borrow additional amounts include Chhattisgarh, Madhya Pradesh, Manipur, Meghalaya, Nagaland and Rajasthan, it said.
To become eligible for incremental borrowing, the states were required to achieve at least 15 percent of their capital expenditure budgets set for 2021-22 by the end of the first quarter, 45 percent by the end of second quarter, 70 percent by the end of third quarter and 100 percent by March 31, 2022.
Eschewing handouts and direct fiscal support, the Narendra Modi government has made public investment in infrastructure projects its main plank to revive the economy, spur demand and create employment in a post-COVID-19 world.
"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," the Finance Ministry said.
Accordingly, out of the net borrowing ceiling of 4 percent of GSDP for the states for 2021-22, 0.50 percent of GSDP was earmarked for incremental capital expenditure to be incurred. The target for incremental capital expenditure for each state to qualify for this incremental borrowing was fixed by the Department of Expenditure.
The next review of states' capex will be done in December, it said.
This time around, the highest additional borrowing room granted is for Andhra Pradesh (Rs 2,655 crore), Madhya Pradesh (Rs 2,590 crore), Kerala (Rs 2,255 crore) and Rajasthan (Rs 2,593 crore).