Coronavirus COVID-19: Centre increases states' borrowing limit from 3% to 5% for FY 2020-21

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In a major relief to the state governments who facing acute shortage of fund due to coronavirus COVID-19 pandemic, Union Finance Minister Nirmala Sitharaman on Sunday (May 17) announced that the Centre has decided to increase the borrowing limit of the states from 3 per cent to 5 per cent for the financial year 2020-21 only.

Addressing a press conference, the Union Minister said that the Centre's decision will give extra resource of Rs 4.48 lakh to the states. 
"The Centre has decided to accede to the request of the states of increasing the borrowing limit from 3 per cent to 5 per cent, for 2020-21 only," she said.

In her fifth and the last tranche of the COVID-19 relief package, Sitharaman said that the net borrowing ceiling of the states for 2020-21 is Rs 6.41 lakh crore, based on 3 per cent of the Gross State Domestic Product (GSDP).

Sitharaman, however, also informed the media that the states have so far borrowed only 14 per cent of the limit authorised, of which 86 per cent of the borrowing remains unutilized. However, they still are asking for special increase and the Centre has approved their request.

Sitharaman also announced an increase of Rs 40,000 crores in allocation for Mahatma Gandhi National Rural Employment Gurantee Act (MGNREGA) to provide employment boost. It is to be noted that budget estimate for MGNREGA was Rs 61,500 crore

Addressing a press conference to announce the fifth and final trance of 20 lakh crore economic packagae to fight COVID-19, Sitharaman expressed hope that the increase in MGNREGA fund allocation will help generate nearly 300 crore person days in total. She also added that the Centre is committted to generate more employment opportunities for returning migrant workers in monsoon as well.