'States raised an additional Rs 1.06 lakh cr in FY21,' says PM Modi

Indian states were able to raise an additional Rs 1.06 lakh crore in financial year 2020-21 amid the COVID-19 pandemic due to the partnership between Centre and states, and the nudge by the Union government to states to raise additional resources conditional to them undertaking reforms, Prime Minister Narendra Modi has said.

Saying that raising enough resources for public welfare while ensuring sustainability is proving to be one of the biggest challenges because of the pandemic, PM Modi, in a LinkedIn blogpost, said there was a significant increase in availability of resources for states because of Centre-State bhagidari or partnership.

The Prime Minister took to Twitter to share the post written by him on LinkedIn.

Reforms by Conviction and Incentives...my @LinkedIn post on innovative policy making in the time of COVID-19, powered by the spirit of Centre-State Bhagidari. https://t.co/ac0jhAqluT

- Narendra Modi (@narendramodi) June 22, 2021

While formulating the economic response to the COVID-19 pandemic, the government wanted to ensure that the solutions do not follow a 'one size fits all' model. "For a federal country of continental dimensions, finding policy instruments at the national level to promote reforms by State Governments is indeed challenging. But, we had faith in the robustness of our federal polity and we moved ahead in the spirit of Centre-State bhagidari," Modi said.

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As part of Aatmanirbhar Bharat package, announced in May last year, the Centre allowed states to borrow an extra amount of up to 2 per cent of their gross state domestic product (GSDP), of which 1 per cent was made conditional on implementation of certain economic reforms.

"This nudge for reform is rare in Indian public finance. This was a nudge, incentivising the states to adopt progressive policies to avail additional funds. 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," the Prime Minister wrote.

The four reforms -- implementing One Nation One Ration Card, ease of doing business reforms, urban local body reforms, and power sector reforms -- were linked to improving the 'Ease of Living' for the public and particularly the poor, the vulnerable, and the middle class, Modi said.

Besides, the reforms also promoted fiscal sustainability.

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While 17 states were granted additional borrowings amounting to Rs 37,600 crore for completing 'One Nation One Ration Card' reform, 20 states were allowed to borrow an additional Rs 39,521 crore for undertaking reforms to enhance 'Ease of Doing Business'.

Saying that the urban body reforms would benefit the urban poor and middle class, the Prime Minister said 11 states were granted additional borrowing of Rs 15,957 crore for undertaking the reforms.

On power sector reforms, Modi said, "13 states implemented at least one component, while 6 states implemented the DBT (direct benefit transfer) component. As a result, Rs 13,201 crore of additional borrowings was permitted."

Various schemes and reforms have remained un-operational often for years for various reasons, however, the Centre and states came together to roll out public friendly reforms in a short span of time amidst the pandemic, the Prime Minister said.

"India has seen a model of 'reforms by stealth and compulsion'. This is a new model of 'reforms by conviction and incentives'," Modi said, adding that the Centre and states would continue to work together for rapid progress of 130 crore Indians.

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