States' borrowing capacity raised from 3% of GDP to 5% for 2020-21 only, says FM

New Delhi, May 17: Finance Minister Nirmala Sitharaman on Sunday said that states net borrowing ceiling for 2020-21 is Rs 6.41 lakh crore based on 3% of GSDP.

"75 percent of thereof was authorised to them in March 2020 itself and timing are left to the states. States have so far borrowed only 14% of the limit authorisation limit. 86% of the authorised borrowing remains unutilized." she added.

In view of the unprecedented situation, the Centre has decided to accede to the request of states and increase the borrowing limits of states from 3% to 5% for 2020-21 only. "This will give states extra resources of Rs 4.28 lakh crore," she said.

Sitharaman said, "Part of the borrowing by states will be linked to specific reforms. From 3-3.5%, the 0.5% will be an unconditional increase. Next 1% to be released in 4 tranches of 0.25%, with each tranche linked to clearly specified, measurable, and feasible reform actions. Further 0.5% will be given if milestones are achieved in at least three out of the four reform areas."