Show outcome, get loan: Govt to states

The Centre will link a large chunk of 50-year interestfree loans to states with specific outcomes, in a bid to nudge them to make capital investments for infrastructure in a time-bound manner, a senior finance ministry official said.

- Rhik Kundu Subhash Narayan

NEW DELHI: Of the 1.3 lakh crore earmarked for the 'special assistance to states for capital investment' scheme in the interim budget 2024-25, about 275,000 crore, or 58%, will be linked to outcomes and reforms carried out by the states, Union finance secretary T.V. Somanathan said.

The remaining 255,000 crore will also come with a "simple condition", Somanathan said: "For availing the 255,000 crore interest-free loan, it (the infrastructure project) should be incremental; don't use this to substitute your capital expendture, make it over and above your last year's overall capital expenditure." 

Interest-free loans with a tenure of 50 years have played a vital role in stimulating capital spending by the states and catalysing the economy in the aftermath of the pandemic. States in India make 20-25% of the overall infrastructure spending, a key focus area for the government.