The borrowing limit of the states has been increased from 3 to 5 per cent by the Central Government. Minister for Finance Nirmala Seetharmana has announced that on the request of the states the borrowing cap has been raised.
So far the stats have borrowed up to 14 per cent of the allowed capacity. They can still take the rest of the 86 per cent. Now that KCR has been raising the issue room tie time in the name of FRBM, the centre has conceded to the request of the states.
In general terms, the borrowing capacity of the states has increased. The overdraft limit has also been extended. In facts, the states are yet to sue the limit of borrowing from the centre.
They can still borrow up to another 86 per cent. This is to empower the states the Minister for Finance explained. The borrowing 3 to 3.5 will be accepted immediately and unconditionally.
But the other 1.5 per cent will be linked to reform as for of the development. This is to benefit the poor and the common man. This could e for ease of doing business, power distribution, ration distribution so on an so forth.
The borrowing above 3.5 per cent will be with measurable norms. Urban local bodies issues can also be resolved with these funds.
