The Centres proposal to extend financial assistance to states in the form of interest-free loan to invest on projects under the PMGati Shaktischeme has evoked mixed response inKarnataka. Some experts even sought to call it a Money lending scheme’.
Union ministerNirmala Sitaramanin her budget speech on Tuesday said that the Centre has proposed to allocate Rs 1 lakh crore to assist the states in catalysing overall Investment in the economy for 2022-23. This comes as an interest-free loan for 50 years and the states are allowed to avail this over and above their borrowing limits allowed under the Fiscal Responsible and Budget management (FRBM) norms.
A state cannot borrow more than 3% of its gross state domestic product (GSDP), but it was relaxed in the backdrop of the covid-induced slowdown. The 15th Finance Commission has allowed the state to borrow up to 4% of its gross state domestic product (GSDP), which is around Rs 17 lakh crore, and Karnataka has proposed to borrow Rs 17,332 crore for 2021-22. Of this 0.5% is linked to power sector reforms.
The Centre has apparently intended to continue the borrowing scheme as it introduced during the first and second wave of pandemic to pay GST compensation and allowed the states to borrow under a special window provided by the Reserve Bank Of India. While the Centre will repay principal and interest on behalf of the states, Karnataka has availed Rs 12,407 crore in 2020-21 under the scheme and it is entitled to get Rs 18,109 crore in 2021-22.
The budget has fixed the Centres Fiscal Deficit target for 2022-23 at 6.4% of gross domestic product (GDP) and some observers said the Centre would not be able to stick to the target if it takes the debt burden of Rs 1 lakh crore and hence it has transferred it to states.