Chandigarh: The Cabinet, on Friday, approved an amendment to avail the benefit of additional borrowing of 2% of Gross State Domestic Product (GSDP) in 2020-21. According to the plan, the state will amend Section 4, in Sub-Section (2), Clause (a) of the Punjab Fiscal Responsibility and Budget Management (FRBM) Act, 2003. The Centre has allowed 2% of GSDP, of which 1% will be unconditional and the remaining 1% will be conditional to specific reforms.
In view of the Covid pandemic, the Centre had provided relaxation in borrowing limits by increasing additional borrowing limit of upto 2% of GSDP for the year 2020-21 subject to implementation of specific state-level reforms as well as amendment of state’s FRBM legislation for the year 2020-21 to this effect.
Of 2%, 0.5% was unconditional and the remaining 1.5% was conditional in respect of reforms including implementation of one nation one ration card system; ease of doing business reforms; urban local body/utility reforms and power sector reforms. The weightage of each reform would be 0.25% of GSDP totalling to 1%. The remaining borrowing limit of 0.50% was to be conditional to an undertaking of at least three out of these reforms.
To compensate the shortfall arising out of GST implementation, the Centre had offered two borrowing options-I and II to the states, of which, Punjab chose option-I. Option-I gives permission to states to borrow the final installment of 0.5% (originally intended as a bonus for completing at least three of the four specified reforms) even without meeting pre-conditions. Thus, Punjab has been allowed 1% unconditional additional borrowing limit in place of 0.5% of the 2% additional borrowing limit allowed earlier. The remaining 1% additional borrowing limit shall be conditional to above mentioned reforms.