Nirmala Sitharaman Announces Rs 12,000 Crore Interest-free 50-year loan For States

Union Finance Minister Nirmala Sitharman on Monday announced a ₹ 12,000 crores 50-year interest-free loan to state governments for spending on capital expenditure projects to give a new thrust to GDP that is the hardest hit by the coronavirus-induced lockdown. Addressing the conference, Ms. Sitharaman said that ₹ 1,600 crores will be given to north-eastern states and Rs 450 crore each for Uttarakhand, Himachal Pradesh.

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States can also use this capital before March 31, 2021, to settle bills of contractors and suppliers. Rs 2,000 crore will be given to states, which fulfill 3 out of 4 reforms stated in the AatmaNirbhar fiscal deficit package.

Money spent on infrastructure and asset creation can help to boost the GDP which has contracted 23.9 percent during the April-June quarter. The allocation of loan amount among the states is estimated to boost the total demand by more than Rs 1 lakh crore. The Finance Minister also announced an additional capital expenditure of Rs 25,000 crore by the central government which will be spent on roads, defense infrastructure, water supply, and urban development.

The policymakers ensured that the measures to stimulate demand will not cause inflation or Government debt in the ensuing years. The sustainable path to boost demand will help revamp businesses that are suffering due to COVID induced drop in demand.

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