NEW DELHI: The Centre is likely to top up the 50-year interest-free capex loans to states by 15% to Rs 1.5 trillion in 2024-25 from Rs 1.3 trillion provided in the interim Budget. This is because of the increased demand from states for the liberal loan facility aimed at boosting economic activity across the country.
Sources told FE that the additional amount is expected to be part of the reform-linked component of the loans as the Centre embarks on next-generation reforms. Accordingly, the reform-tied loans would rise to Rs 95,000 crore from Rs 75,000 crore earmarked in the interim Budget for FY25.
To strengthen the hands of the states, the scheme for providing financial assistance to the states for capital expenditure introduced in Covid-hit FY21 has been extended to FY25 as well with an outlay of Rs 1.3 trillion.
Of this, Rs 55,000 crore in untied capex loans has been rolled out from April 1. The reform/project-linked Rs 75,000 crore, which will likely be increased to Rs 95,000 crore, will be rolled out after the new government is formed in June.
Besides reforms touching on each of the factors of production, the Modi government would likely extend investment and legislative support to key sectors.
The Centre will also work with state governments to encourage them to create a modern set of legislation, by-laws and urban planning processes using technology. It could support long-term infrastructure projects with Centre-state-city partnerships with a vision to revitalise urban landscapes. The states are also likely to be incentivised to reduce compliances for small traders and MSMEs to enhance their ease of living and doing business.
According to the ‘Viksit Bharat @2047’ document, which will be unveiled in July, India will aim for a $30-trillion economy by 2047 to become a developed nation in its 100th year of independence, propelled by radical policy changes and reforms in governance by 2030.
Even though India has become the most populous country for the first time in recorded history by overtaking China, it has to fix structural issues, including accelerating investment in health-education and undertaking land-labour reforms, to boost economic growth and create more jobs before the demographic dividend peters out. India’s growth is closely interlinked with the growth of states. The Centre is also prodding states to prepare their own vision documents.
One of the key impediments in firms going for greenfield projects or expansion of brownfield projects is the labour laws. Even though the Centre has subsumed 44 labour laws into four codes to improve the ease of doing business and attract investment for spurring growth, these have not yet been notified. While some states have drafted rules under the four codes, some states have yet to do that. The government may incentivise states to roll out labour laws.
The Centre could also incentivise state reforms to address local bodies’ capacity constraints and empower these bodies to strengthen governance at the grassroots level to ensure effective service delivery to citizens, the experts said.
States’ capital expenditure likely rose by a robust 33% on year in the first 11 months of 2023-24 compared with a 12% rise in the year-ago period, aided by the Centre’s interest-free capex loans. In FY24, the Centre extended Rs 1.09-trillion loans to states against the revised estimate of Rs 1.05 trillion.
Source: The Financial Express