With FRMB limit hiked, Telangana can now borrow more from Centre

HYDERABAD: The state can raise an additional loan of Rs 3,574 crore in this financial year, as the Union Finance Ministry enhanced the Fiscal Responsibility and Budget Management (FRMB) level to 3.5 per cent for this year.

In a communication to the state finance department, deputy director of Union Finance Ministry Amit Kumar informed that they had provided an additional fiscal space to the state. The aggregate net borrowings by the state government for 2017-18 should not exceed net borrowing ceiling of Rs 25,019 crore, which includes the exsiting borrowing limit of Rs 21,445 crore and an additional fiscal space given now of Rs 3,574 crore, the Union Ministry stated.

The Central government approved the year-to-year flexibility for additional fiscal deficit to the states for the period 2016-2017 to 2019-2020 to a maximum of 0.5 per cent over and above the normal fiscal deficit limit of 3 per cent in any given year under the FRMB Act.

Accordingly, the additional fiscal deficit of 0.5 per cent of the state’s estimated GSDP has been allowed to Telangana for 2017-18. “This translates into additional net borrowing ceiling of Rs 3,574 crore. This additional fiscal space shall be used preferably towards meeting the state’s share of Centrally Sponsored Schemes,” the Finance Ministry stated.

Further, if the state is not found eligible for additional borrowings for 2017-18 at any state under the rolling target flexibility options recommended by the 14th Finance Commission or the fiscal deficit of Telangana exceeds beyond 3.5 per cent of the GSDP for 2017-18 at any stage, the same shall be considered as the borrowings availed beyond the state’s entitlement and will be deducted from the NBC of the following year i.e., 2018-18, the Union Finance Ministry categorically stated in its communication.