Page 451 - ES 2020-21_Volume-1-2 [28-01-21]

78 Economic Survey 2020-21 Volume 2

2.47 During the year 2019-20, in view of prevalent macro-economic scenario and lower tax
collection in 2018-19, one-time special dispensation was allowed to the States by allowing
additional borrowings amounting to ` 0.59 crore for year 2019-20 beyond the State’s eligibility.
2.48 Net borrowing ceilings of the 28 States for the year 2020-21 had been fixed at ` 6.41
lakh crore in line with the fiscal deficit target of 3 per cent of respective State Gross State
Domestic Product (GSDP) as recommended by FC-XV. However, for the year 2020-21, in view
of the unprecedented COVID-19, additional borrowing limit of up to 2 percent of Gross State
Domestic Product (GSDP) was allowed to the States, of which 1% was conditional on state-
level reform implementation. Several steps taken by the Central Government to support the
State Governments towards a faster economic recovery amidst the COVID-19 pandemic may
be seen in Box 4.

Box 4: Measures taken by the Centre to support the
States in times of COVID-19

The Central Government has taken consistent steps to impart unflinching support to the States in the
challenging times of the pandemic. These measures are as follows:
1. Enhanced limit of borrowing for FY2020-21 under Atma Nirbhar Bharat package

• Under the Atma Nirbhar Bharat package, additional borrowing limit of up to 2 percent of
Gross State Domestic Product (GSDP) was allowed to the States, which was equivalent to
` 4.27 lakh crore. Of the additional 2 per cent borrowing allowed to the States, the first
instalment of 0.5 per cent borrowing was untied for all the states. The second part amounting
to 1 per cent of GSDP was subject to implementation of following four specific State level
reforms, where weightage of each reform is 0.25 per cent of GSDP:-
a) Implementation of One Nation One Ration Card System;
b) Ease of doing business reform;

c) Urban Local body/ utility reforms; and
d) Power Sector reforms
The final 0.5 per cent borrowing was conditional on undertaking at least 3 out of the above
mentioned reforms.

As on 30 December 2020, 10 States have implemented the One Nation One Ration Card
System, 7 States have completed the stipulated reforms in the Ease of Doing Business, and
2 States have done local body reforms. Total additional borrowing permission issued so far
to the States who have done the reforms stands at ` 51,682 crore.

2. Compensation to the States for loss in GST revenue

• In order to compensate the states for the loss of GST revenue during FY 2020-21, Central
Government had given the states an option to either borrow the shortfall arising out of GST
implementation through issue of debt under a Special Window coordinated by the Ministry
of Finance which was passed on to the States and UTs (Option 1), or raise the entire shortfall
through the issue of market debt (Option 2). All the 28 states and 3 UTs with legislature
decided to go for option 1 which involves back-to-back borrowing coordinated by the
Ministry of Finance, and would ensure steady flow of resources similar to the flow under GST