Prime Minister Narendra Modi today said states were able to raise an additional Rs 1.06 lakh crore in 2020-21 by implementing a set of reforms that allowed them to borrow more from the Centre. In a blog titled “Reforms by Conviction and Incentives”, he wrote that 23 states have proposed a potential Rs. An additional borrowing of Rs 1.06 lakh crore has been taken. 2.14 lakh crore.
“This remarkable increase in resource availability was made possible through a Centre-State partnership approach,” PM Modi wrote.
In May 2020, the Center had announced that states would be allowed enhanced borrowing for 2020-21 as part of the Atmanirbhar Bharat (self-reliant India) package.
An additional 2 percent of the states’ GDP was allowed, of which 1 percent was conditional on the implementation of certain economic reforms.
This “nudge” for reform – offering financial incentives to adopt progressive policies – is rare in Indian public finance, PM Modi wrote. “The results of this exercise are not only encouraging but also contrary to the perception that there are limited buyers for sound economic policies,” he said.
He wrote, the reforms were linked to “improving the ease of life for the masses and especially the poor, vulnerable and middle class”. Secondly, he also promoted fiscal stability. A financial incentive of .25 per cent was attached for each improvement.
The first reform under the ‘One Nation One Ration Card’ policy required states to ensure that the cards were linked to Aadhaar numbers of family members and that all fair price shops had electronic point-of-sale devices. This, PM Modi wrote, will enable migrant workers to get their food ration from anywhere in the country.
He wrote, “The second reform, aimed at improving the ease of doing business, requires the states to ensure that the renewal of business related licenses under the 7 Acts is automatic, online and non-discretionary on payment of fee only. “
“The third reform requires the states to notify the floor rates of property tax and water and sewerage charges in urban areas in line with the stamp duty guideline values for property transactions and current cost respectively. This will enable the urban poor to get better quality of services. and middle class, support better infrastructure and encourage development,” he wrote.
The fourth reform was the introduction of Direct Benefit Transfer or DBT in lieu of free power supply to farmers.