Centre Considers Boosting Interest-Free Loans To States For Infrastructure Projects

ENA Economy 2024-06-19 16:05:10 New Delhi, Jun 19 (KNN) The Indian government is evaluating plans to increase the allocation for 50-year, interest-free loans offered to state governments in the upcoming annual budget. These loans, aimed at stimulating capital expenditure by states, could see a 20-30 per cent hike according to sources familiar with the matter, as reported by Mint. A portion of the loan disbursements will continue to be linked to specific reforms implemented by recipient states, though the reform criteria are expected to be revised. The increase is being contemplated following the record Rs 2.11 trillion dividend received by the Centre from the Reserve Bank of India last month. The reforms that need to be updated are still under discussion. However, states must ensure these funds supplement rather than substitute their own capital expenditure, said one source on condition of anonymity. The interim budget for 2024-25 had earmarked Rs 1.3 trillion for 'special assistance to states for capital investment', of which Rs 75,000 crore was tied to outcomes and reforms. This reform-linked component is likely to be significantly increased. Current reforms required of states include housing sector reforms, vehicle scrapping incentives, urban planning, housing for police personnel, and establishing digital libraries. The low-interest loans are seen as an effective means to boost infrastructure spending by states, which account for 20-25 per cent of overall infrastructure expenditures. The 'special assistance' initiative was launched in FY21 with Rs 12,000 crore to aid states during the pandemic. Allocations grew to Rs 1.07 trillion in FY23 and Rs 1.3 trillion in FY24, with increasing portions tied to state reforms. Finance ministry data indicates 27-28 states availed the scheme annually between FY21-FY24, with the Centre's outgo ranging from Rs 11,830 crore in FY21 to Rs 81,195 crore in FY23. (KNN Bureau) 38268 https://knnindia.co.in/news/newsdetails/economy/centre-considers-boosting-interest-free-loans-to-states-for-infrastructure-projects 2024-06-19 16:05:10 knnindia.co.in Centre Considers Boosting Interest-Free Loans To States For Infrastructure Projects