{"id":239097,"date":"2023-04-21T20:11:29","date_gmt":"2023-04-21T14:41:29","guid":{"rendered":"https:\/\/blog.forumias.com\/?p=239097"},"modified":"2023-04-24T17:21:27","modified_gmt":"2023-04-24T11:51:27","slug":"centres-interest-free-loan-facility-provides-space-for-states-to-increase-capital-expenditure-will-they","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/centres-interest-free-loan-facility-provides-space-for-states-to-increase-capital-expenditure-will-they\/","title":{"rendered":"Centre\u2019s interest-free loan facility provides space for states to increase capital expenditure. Will they?"},"content":{"rendered":"\n

Source<\/strong>– The post is based on the article \u201cCentre\u2019s interest-free loan facility provides space for states to increase capital expenditure. Will they?\u201d <\/strong>published in \u201cThe Indian Express\u201d <\/strong>on 21st April 2023<\/strong>.<\/p>\n

Syllabus: <\/strong>GS3 \u2013 Indian Economy \u2013 Fiscal Policies<\/p>\n

News<\/strong>– In recent months, there have been two significant developments relating to state governments\u2019 finances. First,<\/strong> a moderation in state governments\u2019 off-budget borrowing, and second,<\/strong> better than expected utilisation of the funds under the central government\u2019s capex loan scheme.<\/p>\n

What are changes made by the central government in case of off-budget borrowings by states?<\/strong><\/h2>\n

State governments\u2019 off-budget borrowings <\/strong>were earlier not subject to strict oversight by the Centre. This allowed states to push some borrowings off-budget.<\/p>\n

However, as per guidelines issued by the Centre in 2021-22, incremental off-budget debt<\/strong> for the year would need to be adjusted over four years between 2023-2026.<\/strong><\/p>\n

Further, off-budget borrowings after this period would be considered as borrowings made by the state itself.<\/strong><\/p>\n

What are the provisions made by the central government in case of interest free capex loans?<\/strong><\/h2>\n

The Centre has released Rs 812 billion to states under the \u201cSpecial Assistance as Loan to States for Capital Expenditure\u201d scheme (interest-free capex loans)<\/strong> in 2022-23. This is higher than the amount indicated in the Centre\u2019s revised estimates.<\/strong><\/p>\n

For the ongoing year, the Centre has further enhanced the allocation under the interest-free capex loan <\/strong>to the states to Rs 1.3 trillion. This loan is over and above the normal borrowing limit <\/strong>for the year.<\/p>\n

There was back-ended utilisation of the capex loan<\/strong> in 2022-23. 30% of the total amount for 2022-23 was disbursed to states in March. So, the Union government seems to have tightened the guidelines<\/strong> for the scheme.<\/p>\n

Around two-thirds of the capex loan<\/strong> will be untied in nature<\/strong>, and it will be released in instalments.<\/p>\n

Why has the central government changed the provisions related to interest free capex loans?<\/strong><\/h2>\n

Centre intends for these funds to supplement, not finance budgeted capex.<\/strong> Recent years have seen lower-than-budgeted capital spending by many states.<\/p>\n

The increased allocation for the interest-free capex loan scheme would support state governments in funding their capital spending<\/strong> this year.<\/p>\n

The full utilization of these funds by states will cover the impact of the scheduled reduction in the borrowing limit and drop in the GST compensation.<\/strong><\/p>\n

Faster identification of projects under this scheme could result in a less back-ended disbursement<\/strong> of funds. This will also have a bearing on the borrowing requirement of states.<\/p>\n

What are issues with state fiscal public finances?<\/strong><\/h2>\n

There is a divergence <\/strong>in states\u2019 actual monthly borrowings <\/strong>against the indicative amount.<\/strong> So, it is difficult to gauge their underlying fiscal health<\/strong>. This suggests that states are unable to project their borrowing requirement accurately in advance.<\/strong><\/p>\n

States\u2019 ability to scale up execution<\/strong> will be critical to ensure the full utilisation of the capex loan. Spending patterns<\/strong> may be influenced by assembly elections in states.<\/p>\n","protected":false},"excerpt":{"rendered":"

Source– The post is based on the article \u201cCentre\u2019s interest-free loan facility provides space for states to increase capital expenditure. Will they?\u201d published in \u201cThe Indian Express\u201d on 21st April 2023. Syllabus: GS3 \u2013 Indian Economy \u2013 Fiscal Policies News– In recent months, there have been two significant developments relating to state governments\u2019 finances. First,… Continue reading Centre\u2019s interest-free loan facility provides space for states to increase capital expenditure. Will they?<\/span><\/a><\/p>\n","protected":false},"author":10320,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[1230,9],"tags":[216,10500,11481],"class_list":["post-239097","post","type-post","status-publish","format-standard","hentry","category-9-pm-daily-articles","category-public","tag-gs-paper-3","tag-indian-express","tag-interest-free-capex-loans","entry"],"jetpack_featured_media_url":"","views":{"total":0,"cached_at":"","cached_date":1701842114},"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/239097","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/users\/10320"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=239097"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/239097\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=239097"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=239097"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=239097"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}