FM says the extra borrowing will be linked to specific reforms, including some recommendations by the FFC The Union government on Sunday raised borrowing limits for states from 3% to 5% of gross state domestic product (GSDP) for the current fiscal year, subject to their carrying out specific reforms.
The move will allow states to get a fiscal headroom of ₹4.28 trillion. While both the central and state governments are struggling with cash flows with economic activity coming to a near standstill following the nationwide lockdown, states are facing a more acute cash crunch as they are at the forefront of the battle against covid-19, incurring most of the associated expenditure.