11 states meet their Capex targets in the 1st Quarter, to raise Rs 15,721 crore.

11 states meet their Capex targets in the First Quarter, to raise Rs 15,721 crore.

In the first quarter of the current fiscal year 2021-22, a total of 11 states met the central government’s capital expenditure objective.

According to a statement made by the Ministry of Finance on Tuesday, the states include Andhra Pradesh, Bihar, Chhattisgarh, Haryana, Kerala, Madhya Pradesh, Manipur, Meghalaya, Nagaland, Rajasthan, and Uttarakhand.

The Department of Expenditure has granted these states permission to borrow an additional Rs 15,721 crore as an incentive.

The additional open market borrowing authority provided is equal to 0.25 percent of their GSP (GSDP). According to the Finance Ministry, the additional financial resources made available will assist states in increasing their capital expenditure.

Capital investment has a large multiplier impact, increasing the economy’s future productive capacity and resulting in a faster pace of economic growth.

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As a result, 0.5 per cent of the net borrowing ceiling (NBC) of 4% of GSDP for states in 2021-22 has been set aside for extra capital expenditure to be undertaken in 2021-22.

The Department of Spending set the additional capital expenditure objective for each state to qualify for this incremental borrowing.

 

States had to reach at least 15% of the objective established for 2021-22 by the end of the first quarter, 45% by the end of the second quarter, 70% by the end of the third quarter, and 100% by March 31, 2022, to be eligible for further borrowing.

The Department of Expenditure will conduct the next evaluation of state capital expenditures in December. The capital expenditures that states have made up to September 30, 2021 will be evaluated in this round.

In March 2022, a third assessment will be conducted based on capital expenditures incurred during the first three quarters of 2021-22.

States that accomplish real capital expenditure of at least 45 percent of the target by September 30, 2021, or 70 percent of the target by December 31, 2021, will be eligible for the capital expenditure-linked borrowing ceiling of 0.5 percent of GSDP.

In June 2022, states will conduct a final review of their actual capital expenditures. Any difference between a state’s actual capital spending for 2021-22 and its projected capital expenditure for 2021-22 will be deducted from the borrowing ceiling for 2022-23.

Gst: 12 states accept centre’s Rs 97,000 crore borrowing option

 12 states, including Bihar, Andhra Pradesh, Uttar Pradesh, Meghalaya, Gujarat, Haryana, Karnataka, Madhya Pradesh, Sikkim, Tripura, Uttarakhand, and Odisha, have so far opted for the first option provided by the centre — Rs 97,000 crore borrowing to compensate for revenue shortfalls due to the shift to goods and service tax (GST).

Manipur is the only state that has opted for the second option, which includes borrowing under the Rs 2.35 lakh crore range, which entails revenue shortfalls due to the GST transition, as well as the economic downturn caused by Covid19.

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 Arunachal Pradesh, Nagaland, Goa, Assam, Mizoram, and Himachal Pradesh are likely to offer their preference between both the borrowing options offered by the Centre last month, in a few days

The centre, which has additional borrowing planned for FY21, requires states to borrow in order to cover the deficit in the cess fund. In the first window, both the principal and the interest would be covered by the termination fund and the States would also be compensated for the balance (Covid19 revenue loss). In the second option, the principal will be covered by a cess fund.

The GST Council will now meet on 5 October instead of 19 September. The question of the GST compensation shortfall may be raised in the monsoon session of the Parliament which begins today.

Approximately 10 opposition-led states have refused both borrowing options on the grounds that the Centre should borrow instead of states, while some have also sought the Prime Minister’s intervention to resolve the burning problem.

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The Centre claimed that it was not under the obligation to compensate for the loss of revenue, depending on the opinion of the Attorney General who stated that the GST Council had to find ways of dealing with the loss of revenue and not the Central Government.

In the current economic situation, it might not be feasible to raise the tax rate or to rationalize the rate in order to compensate for the shortfall, the Center announced at the Council meeting on 27 August putting forth two borrowing options for states.

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