New Delhi: The budget of 2021 has brought economic freedom to the states. After the budget presented on Monday, states will now be able to borrow up to 4 percent of their GDP. The Central Government has given the powers to the states in this budget that states will be able to take loans up to 4 percent of their gross state domestic product (GSDP). Earlier this limit was 3 percent. Non-BJP ruled states like Kerala and Rajasthan have been demanding to increase this limit for a long time.
This step of the Center has brought relief for the states facing a shortage of funds. The central government has taken these steps, following the recommendations of the 15th Finance Commission. While presenting the budget on Monday, Union Finance Minister Nirmala Sitharaman said that "As per the opinion of the 15th Finance Commission, we are allowing the normal ceiling of nickel borrowing for states to be 4 percent of GSDP." This limit has been set for the financial year 2021-22. Union Finance Minister Nirmala Sitharaman said that a part of this borrowing will be spent on capital expenditure. The expenses incurred for big construction like a bridge, road, airport are called capital expenditure.
With this, states have been given permission to take half a percent (0.5%) of the gross state domestic product and also loans with conditions. This will bring even more money into the state treasury. Finance Minister Nirmala Sitharaman also said that the state should bring its fiscal deficit to 3 percent of GSDP by 2023-24.
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