States raised extra Rs 1.06 lakh cr in 2020-21: PM

23-06-2021

New Delhi, Jun 22 (UNI) Prime Minister Narendra Modi on Tuesday said Indian states were able to raise an extra Rs 1.06 lakh crore in financial year 2020-21 amid the coronavirus pandemic due to the partnership between the Centre and states.

Mr Modi shared his blog post on reforms, center-state bhagidari, innovative policy making during Covid times. The post was posted on LinkedIn platform.

In a tweet, the Prime Minister said: "Reforms by Conviction and Incentives...my @LinkedIn post on innovative policy making in the time of COVID-19, powered by the spirit of Centre-State Bhagidari."

In a blog post on LinkedIn, the Prime Minister said, ' The Covid-19 pandemic has come with whole new set of challenges to Governments across the world in terms of policy-making.

India is no exception. Raising enough resources for public welfare while ensuring sustainability is proving to be one of the biggest challenges.

In this back-drop of financial crunch seen across the world, do you know that Indian states were able to borrow significantly more in 2020-21? It would perhaps pleasantly surprise you that states were able to raise an extra Rs 1.06 lakh crore in 2020-21. This significant increase in availability of resources was made possible by an approach of Centre-State bhagidari.'

'When we formulated our economic response to the Covid-19 pandemic, we wanted to ensure that our solutions do not follow a 'one size fits all' model,' the Prime Minister said.

He said for a federal country of continental dimensions, finding policy instruments at the national level to promote reforms by State Governments is indeed challenging.

'But, we had faith in the robustness of our federal polity and we moved ahead in the spirit of Centre-State bhagidari,' the Prime Minister said.

Mr Modi said in May 2020, as part of the Aatmanirbhar Bharat package, the Government of India announced that State Governments would be allowed enhanced borrowing for 2020-21.

'An extra 2 per cent of GSDP was allowed, of which 1 per cent was made conditional on the implementation of certain economic reforms. This nudge for reform is rare in Indian public finance. This was a nudge, incentivising the states to adopt progressive policies to avail additional funds,' he said.

The results of this exercise are not only encouraging but also run contrary to the notion that there are limited takers for sound economic policies, the Prime Minister said.

Mr Modi said the four reforms to which additional borrowings were linked (with 0.25 per cent of GDP tied to each one) had two characteristics.

'Firstly, each of the reforms was linked to improving the Ease of Living to the public and particularly the poor, the vulnerable, and the middle class. Secondly, they also promoted fiscal sustainability,' he said.

Mr Modi said the first reform under the 'One Nation One Ration Card' policy required State Governments to ensure that all ration cards in the State under the National Food Security Act (NFSA) were seeded with the Aadhaar number of all family members and that all Fair Price Shops had Electronic Point of Sale devices.

He said the second reform, aimed at improving ease of doing business, required states to ensure that renewal of business-related licences under 7 Acts is made automatic, online and non-discretionary on mere payment of fees.

Mr Modi said the third reform required states to notify floor rates of property tax and of water and sewerage charges, in consonance with stamp duty guideline values for property transactions and current costs respectively, in urban areas.

He said the fourth reform was introduction of Direct Benefit Transfer (DBT) in lieu of free electricity supply to farmers.

'Overall, 23 states availed of additional borrowings of Rs 1.06 lakh crore out of a potential of Rs 2.14 lakh crore. As a result, the aggregate borrowing permission granted to states for 2020-21 (conditional and unconditional) was 4.5 per cent of the initially estimated GSDP,' the Prime Minister said.

'For a large nation with complex challenges as ours, this was a unique experience. We have often seen that for various reasons, schemes and reforms remain un-operational often for years. This was a pleasant departure from the past where the Centre & States came together to roll out public friendly reforms in a short span of time amidst the pandemic. This was made possible due to our approach of Sabka Saath, Sabka Vikas and Sabka Vishwas,' Mr Modi said.

'Officials who have been working on these reforms suggest that without this incentive of additional funds, enactment of these policies would have taken years. India has seen a model of 'reforms by stealth and compulsion'. This is a new model of 'reforms by conviction and incentives',' he said.

'I am thankful to all the states who took the lead in ushering in these policies amidst tough times for the betterment of their citizens. We shall continue working together for the rapid progress of 130 crore Indians,' the Prime Minister said.