A total of 11 states have achieved the target set by the Central government for capital expenditure in first quarter of current financial year 2021-22.
They are Andhra Pradesh, Bihar, Chhattisgarh, Haryana, Kerala, Madhya Pradesh, Manipur, Meghalaya, Nagaland, Rajasthan and Uttarakhand, said a statement released by Ministry of Finance on Tuesday.
As an incentive, these states have been granted permission by the Department of Expenditure to borrow an additional amount of Rs 15,721 crore.
The additional open market borrowing permission granted is equivalent to 0.25 per cent of their Gross State Domestic Product (GSDP). Additional financial resources thus made available will help the states in pushing their capital expenditure further, said the Finance Ministry.
Capital expenditure has a high multiplier effect, enhances the future productive capacity of economy and results in a higher rate of economic growth.
Accordingly, out of the net borrowing ceiling (NBC) of 4 per cent of GSDP for states for 2021-22, 0.5 per cent of GSDP was earmarked for incremental capital expenditure to be incurred during 2021-22.
The target for incremental capital expenditure for each state to qualify for this incremental borrowing was fixed by the Department of Expenditure.
To become eligible for incremental borrowing, states were required to achieve at least 15 per cent of the target set for 2021-22 by the end of first quarter of 2021-22, 45 per cent by the end of second quarter, 70 per cent by the end of third quarter and 100 per cent by March 31, 2022.
The next review of capital expenditure of states will be undertaken by the Department of Expenditure in December. In this round, capital expenditure achieved by the states till September 30, 2021 will be assessed.
Third review will be done in March 2022 on the basis of capital expenditure incurred during the first three quarters of 2021-22.
The capital expenditure-linked borrowing ceiling of 0.5 per cent of GSDP will be allowed to those states who will achieve actual capital expenditure of at least 45 per cent of the target by September 30, 2021 or 70 per cent of the target by December 31, 2021.
There will be a final review of actual capital expenditure by states in June 2022. Any shortfall or deficiency in actual capital expenditure for 2021-22 by a state in comparison with targeted capital expenditure for 2021-22 will be adjusted from borrowing ceiling for 2022-23.
( With inputs from ANI )
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