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50-year loan likely to strengthen Centre's grip over states' debt

14th Finance Commission had said 2 states could become debt-free from Centre by '25, rest by '30

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Finance Commission | Indian Economy

Abhishek Waghmare  |  Mumbai 

On Monday, the central government announced a “special interest-free 50-year loan to states” worth Rs 12,000 crore. While its small quantum is being debated, the long term appears to have sown the seeds for the Centre’s near-perpetual control of states’ financial borrowing from markets, courtesy a provision in the Constitution.

Article 293 (3) of the Constitution mandates a state to seek Centre’s approval for any borrowing from the market — and here’s the important part — so long as the state has outstanding debt towards the Centre. To be ...

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First Published: Fri, October 16 2020. 06:05 IST
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