Telangana Planning Board welcomes hike in borrowing limit for States

V Rishi Kumar Hyderabad | Updated on May 18, 2020

Expresses concern over reforms link to borrowings

Telangana Planning Board, while welcoming the Centre’s decision to permit States to hike borrowing limits, has expressed concern over linking this measure to reforms.

It has urged the Centre to defer the linking of reforms to increased borrowing limits and allow the States to borrow at 5% of FRBM limits without any preconditions.

Responding to Centre' relaxation of borrowing limits of States, B. Vinod Kumar, Vice Chairman, Telangana Planning Board, said, “The increase in FRBM borrowing limit from 3% to 5% of GSDP is much awaited. States have been requesting it for long time. But putting preconditions is not in the interests of Federal Spirit.”

The Finance Minister announcement to increase net borrowing of States from 3% to 5 % of State GSDP will give States extra resources of Rs.4.38 lakh crore.

“It is not correct to link the increased borrowing limits to reforms when States are reeling under the COVID crisis. Reforms are always welcome and they bring also lot of pain in the initial stages of implementation. All States are now relaxing lockdown and Central Government is also taking many measures to reopen the Economy,” he said.

The decision to increase borrowing limit under FRBM from 3% to 5% of State GSDP would provide much needed relief to State Governments. But the increase in the borrowing limits are linked to specified reforms to be undertaken at State Level. The reforms include Universalisation of “One Nation One Ration Card,” Ease of Doing Business, Power Distribution Reforms and Urban Local Body Reforms.

After lifting of Lockdown, it is expected that there would be sharp spike in COVID cases as is the experience at global level and as per the warnings of WHO. Therefore, all energies and resources of Governments would be focused in mitigating the increased COVID cases and also with gradual safe reopening of economic activities.

Under such circumstances, it would not be in fitness of things to place additional burden on State Governments for undertaking critical reforms in above sectors for providing liquidity support. The capacity of States would be severely constrained to undertake such reforms while facing the COVID crisis, he felt.

Published on May 18, 2020

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