The government’s decision to raise borrowing limits for states for the current fiscal from 3% of gross state domestic product (GSDP) to 5% has led to a clear political divide between the Bharatiya Janata Party (BJP)-and Opposition-ruled state governments over conditionalities.
State governments, under considerable financial stress because of the standstill in economic activity and shrinking revenues, have been demanding direct financial assistance and more autonomy to decide how to spend the money.
Finance minister Nirmala Sitharaman, while announcing the fifth tranche of reform stimulus on Sunday, said the Centre’s move to increase borrowing powers will give states an extra ₹4.28 trillion.