Centre relaxes debt relief norms, allows States to borrow an extra Rs 30,000 crore

January 29th, 2009 - 11:49 pm ICT by ANI  

New Delhi, Jan.29 (ANI): The Centre, operationalising its second stimulus package aimed at boosting the economy, on Thursday relaxed the debt relief guidelines and allowed states to borrow an additional Rs 30,000 crore to step up capital expenditure.
According to an official spokesman, the States would now be able to borrow an additional 0.5 percent of their Gross State Domestic Product (GSDP), amounting to Rs 30,000 crore, for capital expenditure without losing the debt relief benefits recommended by the Finance Commission.
Pursuant to recommendations of the 12th Finance Commission, the Centre had permitted the States to borrow up to 3 per cent of GSDP, that limit has now been raised to 3.5 percent. The relaxation dealing with the fiscal deficit targets and borrowing ceiling of the states will be a one-time measure, an official release said.
The Finance Ministry could also allow states to borrow an additional 0.5 percent of GSDP (Gross State Domestic Product), over and above 3.5 percent, for undertaking capital expenditure, the official release stated.
However, states borrowing more than the ceiling of 3.5 percent of their GSDP will not be entitled to debt relief benefits under Debt Consolidation and Relief Facility (DCRF).
The Finance Ministry, the release said, will be writing to the 13th Finance Commission to incorporate necessary changes in the debt relief formula under the DCRF scheme.
Besides, the states have also been advised to appropriately amend their Fiscal Responsibility and Budget Management Acts making room for more borrowings.
To handle the impact of the global financial meltdown on the country, the Centre came out with a second stimulus package earlier this month enhancing the borrowing limits of the states. (ANI)

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