Centre relaxes borrowing norms for states
The Centre on Thursday allowed states to borrow up to an additional Rs 21,000 crore in the current fiscal to deal with the economic slowdown.
The decision to relax the borrowing norms was taken by the Union Cabinet here.New Delhi: To spur the slowing economy, the Centre on Thursday allowed states to raise an additional Rs 21,000 crore during the current financial year by relaxing their fiscal consolidation targets.
States will not lose the assistance given by the Centre, even if their fiscal deficit touches four per cent of their respective gross domestic products by borrowing additional amount from the market, according to a decision taken by the Cabinet here.
The Centre gives debt and interest relief under the Debt Consolidation and Relief Facility to those states which meet their fiscal deficit targets.
The move to provide more flexibility to states in this regard was part of the 2009-10 Budget proposals tabled by Finance Minister Pranab Mukherjee in the Lok Sabha.
As part of second stimulus package, states have been allowed to go for additional market borrowings even if their fiscal deficit reaches 3.5 percent of the size of their respective economies.
Earlier, this cap was fixed at three per cent of the states` respective GDP.
"The Union Cabinet today approved the relaxation of the Debt Consolidation and Relief Facility guidelines, to enable the states to borrow up to four per cent of their respective gross state domestic product during 2009-10," Information and Broadcasting Minister Ambika Soni told reporters.
Soni said the Centre`s move would go a long way in reversing the impact of economic slowdown and accelerate the growth revival in the medium term.
Hit hard by economic slowdown, states have been asking for greater grants from the Centre and more flexibility in terms of market borrowings.
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