FM gives ₹1 lakh crore in interest-free loans as booster shot to states
NEW DELHI: In a major boost to states’ resources, finance minister Nirmala Sitharaman in the Union Budget on Tuesday proposed a 50-year, interest-free loan of ₹1 lakh crore to states to enable them to spend on capital investments, especially in infrastructure, under the PM GatiShakti Master Plan during 2022-23.
These loans will be available over and above normal permissible borrowing limits of states, Sitharaman said in her budget speech.
The Prime Minister GatiShakti-National Master Plan caters to multimodal connectivity to economic zones. GatiShakti — a digital platform — brings 16 ministries including rail and roadways together for integrated planning and coordinated implementation of infrastructure connectivity projects.
“For 2022-23, allocation is ₹1 lakh crore to assist the states in catalysing overall investments in economy. These 50-year interest-free loans are over and above normal borrowings allowed to states. It will be used for PM GatiShaktirelated and other productive capital investments of states,” the FM said.
PM GatiShakti is a transformative approach for “economic growth and sustainable development”, Sitharaman said, driven by seven growth engines: roads, railways, airports, ports, mass transport, waterways, and logistics infrastructure.
“Well, this is for the first time that the budget has recognised the needs of state governments with an extra ₹1 lakh crore for catalysing their capital expenditure and also committing a higher borrowing of 4% including 0.5% for power reforms,” said NK Singh, an economist and chairman of the 15th Finance Commission.
Sitharaman announced that in 2022-23, in accordance with recommendations of the 15th Finance Commission, states would be allowed a fiscal deficit of 4% of gross state domestic product, of which 0.5% will be tied to power-sector reforms. Conditions for this financial assistance have already been communicated to state governments.
Sitharaman’s fourth budget proposed expanding annual spending to ₹39.5 lakh crore to crank up growth in Asia’s third-largest economy, as budgeted capital expenditure is set to rise by a significant 35% to ₹7.9 lakh crore.
This is expected to leave a fiscal deficit of 6.4% of GDP in the next financial year.
“It’s a big bang budget, but depends on where one stands on the bang parameter. The massive ramp-up of capital spending and focus on infrastructure cements the Budget’s credentials as a firmly growthoriented one,” said Dr Aurodeep Nandi, India economist at Nomura, in a note.
Karnataka chief minister basvaraj Bommai welcomed the loan, saying it would provide impetus to infrastructure development. ‘
’Several of our pending projects can be covered under the scheme, and we can develop a world-class budget,” he said.
Jharkhand finance minister Rameshwar Oran, howeverr, said, “Gatishakti is nothing but an eyewash. There are so many conditions that are difficult to meet. I will comment when the fine print is released.”