Finance Minister raises states’ borrowing limit in the last set of economic stimulus package

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The finance minister said that the overall economic stimulus package under the Atmanirbhar Bharat mission announced by Prime Minister Narendra Modi early this week would amount to a total Rs 20.97 lakh crore.

In a major relief to the states, Union Finance Minister Nirmala Sitharaman announced an increase in their borrowing limits from the present 3% to 5% of the Gross Domestic Product (GSDP) for the year 2020-21.

The measure is part of the fifth and final set of the Rs.20 lakh crore economic stimulus package announced by Prime Minister Narendra Modi early this week unveiled by the finance minister in New Delhi on Saturday.

Part of the borrowing will be linked to specific reforms in power sector, urban development and health and sanitation. The states have been allowed flexibility only for 0.5% borrowing. They can avail the next 1% by implementing the reforms identified by the Centre. The final 0.5 per cent will depend on the progress of the reforms.

Sitharaman said that the state governments, so far, have borrowed only 14% of the limit which is authorised to them while 86% of the limit remains unutilized. Despite Centre’s stressed resources, Revenue Deficit Grants of Rs 12,390 crores was timely given to various states in April and May.

Sitharaman said that the government has taken several steps to help states battle the Covid-19 pandemic.

“Rs 15000 crore have been announced for states, essential items, testing labs and kits, along with rolling out of teleconsultation services, the launch of Aarogya Setu app and protection to health care workers with adequate PPEs,” she added.

Another major announcement in the final set is a hike of Rs 40,000 crores in allocation for Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) to provide employment boost. This is over and above the budget allocation of Rs 61,500 crore

The minister said that the MNGREGA fund allocation will help generate nearly 300 crore person-days in total. She also added that the Centre is committed to generating more employment opportunities for returning migrant workers in the monsoon season as well.

The finance minister also paved the way for opening up of all sectors to private companies, while allowing for consolidation of the PSU companies (public sector utilities) into only strategic sectors, to be notified. Further, each of such notified strategic areas will have a maximum of four PSUs, and the remaining state-run companies would be either merged or privatised.

The move could trigger a series of mergers, and disinvestment, sale and privatisation of state-run companies in the coming months and years. Nirmala Sitharaman said that limiting the number of PSUs in each sector would minimise wasteful administrative costs, said a Financial Express report.

During the press conference, Sitharaman also outlined what the Centre has done in the past two months in light of the COVID-19 crisis. Nirmala Sitharaman said that the overall economic stimulus package under the Atmanirbhar Bharat mission amounts to Rs 20.97 lakh crore.

The first tranche of announcements focusing on Micro Small and Medium Enterprises and the middle class amounts to Rs 594,550 crore. The stimulus provided in the second tranche of the economic package was Rs 310,000 crores and Rs 150,000 crore was announced in the third tranche.

In the fourth and fifth tranches of the economic package amounts to Rs 48,100 crore, the Union finance minister said.

The final package focused on MGNREGA, health, education, business, decriminalisation of the Companies Act, ease of doing business, public sector and enterprises and state government and resources related to the state governments (with agency inputs)  

Image Credit: The Hindu

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