The states are facing sharp decline in revenues

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States would be able to borrow more money, the Centre said today, increasing their borrowing limit from 3 per cent to 5 percent. This would give them an Rs 4.28 lakh crore, said Union finance minister Nirmala Sitharaman, unveiling the Rs 20 lakh crore fiscal stimulus in the fifth and the last tranche.

The states are facing sharp decline in revenues following the countrywide lockdown imposed to counter coronavirus. “We have consistently provided the necessary support because they are at the front end of fighting the pandemic,” Ms Sitharaman said.

The states have a net borrowing ceiling, the minister said. They can borrow upto 3 per cent of state’s GSDP. “The government is increasing the borrowing limit to 5 per cent from 3 per cent. This will give an additional Rs 4.28 lakh crore to states,” the minister said.

The minister said the government has also asked the Reserve Bank to increase the advance limits for states by 60%.

The number of days a state can stay in continuous overdraft days has been increased from 14 days to 21 days and from 32 to 51 days quarterly, Ms Sitharaman said.

The states have been demanding financial assistance for long. Last week, during their videoconference with Prime Minister Narenra Modi, all Chief Ministers underscored the point. The Centre must release their share of the Goods and Services Act, they said, and provide further assistance in the battle against coronavirus.

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