Eleven States Achieve Capital Expenditure Target Set By Centre For Q1 FY22, Get Permission To Mobilise Rs 15,721 crore

Eleven states that met the target for capital expenditure in the first quarter of current financial year have been granted permission to mobilise additional Rs 15,721 crore from the market, the Union Finance Ministry said on Tuesday (14 September).

According to the ministry, eleven states namely, Andhra Pradesh, Bihar, Chhattisgarh, Haryana, Kerala, Madhya Pradesh, Manipur, Meghalaya, Nagaland, Rajasthan and Uttarakhand have achieved the target set by the Ministry of Finance for the capital expenditure in the first Quarter of 2021-22.

"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 percent of their Gross State Domestic Product (GSDP)," the Finance Ministry said in a statement.

Additional financial resources thus made available will help the states in pushing their capital expenditure further, the ministry added.

The ministry said that the capital expenditure has a high multiplier effect, enhances the future productive capacity of the economy, and results in a higher rate of economic growth.

"Accordingly, out of the net borrowing ceiling (NBC) of 4 percent of GSDP for the states for 2021-22, 0.50 percent of GSDP was earmarked for incremental capital expenditure to be incurred by the states during 2021-22," it added.

The target for incremental capital xpenditure for each state to qualify for this incremental borrowing was fixed by the Department of Expenditure under the Finance Ministry.

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 the 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 percent by 31 March 2022, the ministry said.

Next review of Capital expenditure of states will be undertaken by the Department of Expenditure in December 2021. In this round, capital expenditure achieved by the States till 30 September 2021 will be assessed.

Third review will be done in the month of March 2022 on the basis of capital expenditure incurred by the states during the first three quarters of the year 2021-22.

The capital expenditure-linked borrowing ceiling of 0.50 percent of GSDP will be allowed to those states who will achieve actual capital expenditure of at least 45 percent of the target by 30 September 2021 or 70 percent of the target by 31 December 2021, the ministry said.

There would be a final review of actual capital expenditure by the states in the month of June 2022.

Any shortfall or deficiency in actual capital expenditure for the year 2021-22 by the state in comparison with the targeted capital expenditure for the year 2021-22, will be adjusted from the borrowing ceiling of the state for the year 2022-23, it said.