Reform-linked borrowing by states new model of public finance: PM Modi

Says states got Rs 1.06 trn in FY21 through a partnership

Prime Minister Narendra Modi on Tuesday said that the new model of public finance, where states were allowed to exceed their annual borrowing limits in 2020-21 only if they undertook certain pre-specified reforms, is a classic example of the new model of ‘reforms by conviction and incentives.’

In a blog posted on LinkedIn, Modi said India has seen a model of “reforms by stealth and compulsion.” This is a new model of “reforms by conviction and incentives.”

“This was a nudge, incentivising states to adopt progressive policies to avail additional funds. The results of this exercise are not only encouraging but also