Centre allows addl Rs16,691 cr borrowing for 7 states on meeting capex goal

FM to meet state CMs on Monday to push investment-led growth

Tamil Nadu has borrowed close to a massive Rs 40,000 crore in four-and-a-half months, compared to Rs 17,000 crore last year

The Union government has allowed seven states to additionally borrow Rs 16,691 crore on meeting capital expenditure targets for the first half of this fiscal year, Finance Secretary TV Somanathan said.

Chhattisgarh, Kerala, Madhya Pradesh, Meghalaya, Punjab, Rajasthan, and Telangana have achieved the target of 45 per cent of the total capital for FY22 up to July-September.

Out of the net borrowing cap of 4 per cent of Gross State Development Product (GSDP) for 2021-22, borrowings up to 0.50 per cent of GSDP were earmarked for incremental capital expenditure. A capex target of Rs 5.79 trillion has been set for all states, and if their capital spending exceeds this target, they will be eligible to borrow an additional Rs 1.05 trillion over their permissible borrowing limit of Rs 8.46 trillion. Rs 8.46 trillion is the net borrowing limit for states for the financial year 2021-22, set at 4 per cent of their GSDP.

States were required to achieve at least 15 per cent of this full year target by the end of first quarter, 45 per cent by the end of second quarter, 70 per cent by the end of third quarter, and 100 per cent by March 31, 2022.

The Centre had earlier undertaken a capex review of states in September 2021, and an additional borrowing permission of Rs 15,721 crore was issued to 11 states to meet the target.

After two rounds of review of capex, a total additional borrowing permission of Rs 32,412 crore has been given to states by the Centre.

A third review of capex will be undertaken in March, based on capital spending by states in April-December. The capital expenditure-linked borrowing ceiling of 0.50 per cent of GSDP will be allowed to those states that will achieve actual capital expenditure of at least 70 per cent of the full year target by December 31, 2021.


A final review of actual capital expenditure will be held in June, 2022, and any shortfall or deficiency in actual capex for FY22 by the state as against the target, will be adjusted from the borrowing ceiling of respective states for financial year 2022-23.

Meeting with states

Finance Minister Nirmala Sitharaman will meet chief ministers of states and Union Territories to nudge them to take policy steps to take India towards a higher sustainable growth trajectory.

The focus of the dialogue with states would be to address state-level challenges and to create more opportunities to boost investments and push the economy on a sustained higher growth trajectory, Finance Secretary TV Somanathan said.

“...Several of the things that are needed to push India to a higher growth path, a sustainable higher growth path, actually lie in the domain of state governments,” Somanathan said.

With strong economic recovery, Centre’s push towards capex has instilled confidence in both domestic and foreign investors to invest in India, Somanathan said.

“While the investor sentiment is good, there is a need to capitalise on the momentum already created,” said a statement from the Ministry of Finance. India has witnessed foreign direct investment of $64 billion in the first four months of the current financial year.

“The finance minister seeks to embark on a collaborative growth vision for the nation and encourage an open exchange of ideas centered on enhancing the investment climate of the country,” the statement said.

The interaction will attempt to create a policy discourse for investment-led growth. This would be possible through investment promotion, efficiencies brought about by Ease of Doing Business reforms, and an emphasis on accelerating approvals and clearances up to Urban Local Bodies levels.

The states will share their ideas and vision for enhancing the investment climate to make India the fastest growing economy.