Borrowings by states or their organisations have to be within 3.5% of GSDP: Finance Secretary TV Somanathan

Finance Secretary TV Somanathan

Finance Secretary TV Somanathan on February 27 said the states’ borrowings have to be within the permissible limit of 3.5 percent of their gross state domestic product (GSDP) in FY24, which will include any borrowing by their organisations as well.

“The present situation is if the borrowing is to be serviced from the consolidated fund of the state, then regardless if it is taken by the state or an organisation of the state, it will be counted within the permissible borrowing ceiling of the state. This is being enforced from 2022-23. It will continue to be the case in future,” Somanathan said in a post-budget press briefing in Sikkim.

The Union Budget has kept 3.5 percent of GSDP as their borrowing limit for FY24 which includes a 0.5 percent conditional window linked to power sector reforms.

Somanathan said that the change was brought as it was noticed that in some cases the borrowing which was actually to be serviced by states was not under the 3 percent limit prescribed.

“The central government keeps under review the borrowing of states and fixes their ceilings. The change has been brought from 2022-23. We noticed in some cases that borrowing, which was actually to be serviced by state governments, was not within the 3 percent ceiling. So that is now being reckoned within the 3 percent ceiling,” he said.