In a groundbreaking development, the Finance Ministry has granted permission for 11 states to borrow an additional amount of Rs 15,721 crore after these states achieved the capital expenditure (CAPEX) target set for the June quarter. These seven states are Madhya Pradesh, Andhra Pradesh, Bihar, Chhattisgarh, Kerala, Manipur, Haryana, Rajasthan Meghalaya, Nagaland and Uttarakhand. These 11 states have achieved the target set by the Ministry of Finance for the capital expenditure in the 1st Quarter of 2021-22. As an incentive, these States have been granted permission by the Department of Expenditure to borrow an additional amount of Rs 15,721 crore,'' the Ministry said in a statement.
The Ministry said CAPEX has a high multiplier effect, enhances the future productive capacity of the economy, and results in a higher rate of economic growth. The additional open market borrowing permission granted is equivalent to 0.25 percent of their Gross State Domestic Product (GSDP). Additional financial resources thus made available will help the States in pushing their capital expenditure further.
Accordingly, out of the net borrowing ceiling of 4 percent of GSDP for the states for 2021-22, 0.50 percent of GSDP was earmarked for incremental capital expenditure to be incurred by the States during 2021-22. The target for incremental capital expenditure for each state to qualify for this incremental borrowing was fixed by the Department of Expenditure.