The Finance Ministry October 12 announced interest-free 50-year loans worth Rs 12,000 crore to states for capital expenditure with an aim to boost economic activities.
As part of the announcements, the government said Rs 2,500 crore will be for all the North East (Rs 1,600 crore), and Rs 900 crore for Uttarakhand and Himachal Pradesh. The second part of Rs 7,500 crore will be for other states, in proportion to share in Finance Commission devolution.
"Capital expenditure - money spent on infrastructure and asset creation - has a multiplier effect on the economy, it not only improves current GDP but also future GDP, we want to give a new thrust to capital expenditure of both states and Centre," Finance Minister Nirmala Sitharaman said in a media address.
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The government also announced an additional budget of Rs 25,000 crore, which would be provided for capital expenditure of Centre on roads, defence, infrastructure, water supply, urban development and domestically produced capital equipment.
While announcing the measures, the government said the supply constraints have been eased, but consumer demand is still affected.
"COVID-19 has adversely affected the economy, needs of poor and weak sections of society have been addressed in the government's Aatma Nirbhar Bharat package. Proposals presented today are designed to stimulate demand in a fiscally prudent way. Some proposals for advancing/front-loading of expenditure have been made. Others are directly linked to an increase in GDP," the finance minister said.