States had been in a position to increase an additional Rs 1.06 lakh crores in 2020-21 by means of implementing a set of reforms that allowed them to borrow extra from the Centre, Prime Minister Narendra Modi mentioned immediately. In a weblog titled “Reforms by Conviction and Incentives”, he wrote that 23 states availed of extra borrowings of Rs.1.06 lakh crore out of a possible Rs. 2.14 lakh crore.
“This significant increase in availability of resources was made possible by an approach of Centre-State bhagidari,” PM Modi wrote.
In May 2020, the Centre had introduced that states can be allowed enhanced borrowing for 2020-21 as a part of the Aatmanirbhar Bharat (Self-Reliant India) package deal.
An additional 2 per cent of Gross Domestic Product of states was allowed, of which 1 per cent was conditional to the implementation of sure financial reforms.
This “nudge” for reform — providing monetary incentives to undertake progressive insurance policies — is uncommon in Indian public finance, PM Modi wrote. “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,” he added.
The reforms, he wrote, had been linked to 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”. A monetary incentive of .25 per cent was hooked up to every reform.
The first reform below the ‘One Nation One Ration Card’ coverage required states to make sure that the playing cards had been linked to Aadhaar numbers of members of the family and all Fair Price Shops had Electronic Point of Sale units. This, PM Modi wrote, would allow migrant staff to attract their meals ration from anyplace within the nation.
“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,” he wrote.
“The third reform required states to notify floor rates of property tax and of water & sewerage charges, in consonance with stamp duty guideline values for property transactions and current costs respectively, in urban areas. This would enable better quality of services to the urban poor and middle class, support better infrastructure and stimulate growth,” he wrote.
The fourth reform was introduction of Direct Benefit Transfer or DBT in lieu of free electrical energy provide to farmers.