Fiscal stimulus 2.0: States allowed to borrow more, but with conditions

Officials say states have been sent a memorandum explaining the needed reforms

Acceding to the demand by states to let them borrow more in light of resource crunch and expenditure commitments during Covid-19, Finance Minister Nirmala Sitharaman said on Sunday the Centre had increased their borrowing limit to 5 per cent of their respective gross state domestic product, from 3 per cent, only for the current fiscal year.

However, this increase would be linked to strict conditions. Immediately after Sitharaman’s briefing, the Finance Ministry issued a memorandum to states detailing these conditions and goals. The FM said this would give states “extra resources of Rs 4.28 trillion”. The move comes just a week