FinMin gives nod to seven states to mobilise additional Rs 16,691 cr to push capital expenditure

In order to boost capital expenditure, seven states namely, Chhattisgarh, Kerala, Madhya Pradesh, Meghalaya, Punjab, Rajasthan and Telangana have been granted permission by the Department of Expenditure on Friday to borrow an additional amount of Rs 16,691 crore.

According to the Ministry of Finance, these seven states have achieved the target set by the Ministry for the capital expenditure upto the second quarter of 2021-22. The additional open market borrowing permission issued is equivalent to 0.5 per cent of Gross State Domestic Product (GSDP). Additional financial resources thus made available will help the States in pushing their capital expenditure further.

Capital expenditure has a high multiplier effect, enhances the future productive capacity of the economy, and results in a higher rate of economic growth. Accordingly, out of the net borrowing ceiling (NBC) of 4 per cent of GSDP for the States for 2021-22, borrowings upto 0.50 per cent of GSDP were earmarked for incremental capital expenditure to be incurred by the States during 2021-22, said the Finance Ministry.

The target for incremental capital expenditure for each state to qualify for this incremental borrowing was fixed by the Department of Expenditure.

To become eligible for incremental borrowing, States were required to achieve at least 15 per cent of the target set for 2021-22 by the end of the first quarter of 2021-22, 45 per cent by the end of the second quarter, 70 per cent by the end of the third quarter and 100 per cent by March 31, 2022.

Earlier, after the 1st round of review undertaken in September 2021, additional borrowing permission of Rs. 15,721 crore were issued to 11 States for meeting the target for capital expenditure set for the 1st quarter of 2021-22. Thus, after two rounds of review of capital expenditure, total additional borrowing permission of Rs. 32,412 crore has been issued to States.

In this round of review of capital expenditure of States, capital expenditure achieved by the States till September 30 2021 has been assessed in respect of 22 States, for which data of actual capital expenditure is available. The eligibility of the remaining six States will be assessed on the availability of data from the Comptroller and Auditor General of India (CAG).

The third round of review will be undertaken in the month of March, 2022 on the basis of capital expenditure incurred by the State during the first three quarters of the year 2021-22. The capital expenditure-linked borrowing ceiling of 0.50 per cent of GSDP will be allowed to those States who will achieve actual capital expenditure of at least 70 per cent of the target by December 31, 2021.

There would be a final review of actual capital expenditure by the States in the month of June, 2022. Any shortfall/deficiency in actual capital expenditure for the year 2021-22 by the State in comparison with the targeted capital expenditure for the year 2021-22, will be adjusted from the borrowing ceiling of the State for the year 2022-23.

( With inputs from ANI )