HYDERABAD: The much-awaited relaxation of Fiscal Responsibility and Budget Management (FRMB) norms has finally happened and the Telangana State is hoping that this would open a way for the state to borrow more money to take up its flagship programmes.
The Union Cabinet’s decision on Wednesday to provide relaxation of norms under the FRBM Act, 2003 will allow states to borrow loans up to 3.5 per cent of the Gross State Domestic Product (GSDP). The decision is good news to Telangana as the state has been struggling to source funds to take up major irrigation projects. The relaxation of norms will help the state to source an additional loan of Rs 3,000 crore per year.
The TS government has made umpteen representations to the Centre since the Finance Commsission had made the recommendations. Finally, the Union Cabinet decided to relax the FRBM rules.
The Telangana state’s GSDP is estimated to be Rs 5.83 lakh crore in 2015-16 at current prices. The 0.5 per cent relaxation on FRBM means that the State can borrow upto Rs 3,000 crore more every year for developmental activities.
However, the Union Cabinet has made it clear that since the year 2015-16 is already over, the states will not get any benefit of additional borrowings for 2015-16. The implications for the remaining period of Finance Commission award, i.e., 2016-17 to 2019-20, would depend upon the eligibility of the respective states.
According to the FC, the debt-GSDP ratio should not exceed 25 per cent of the GSDP. The second condition is that interest payments should not exceed 10 per cent of the revenue receipts. The third one says the state should have surplus revenue in the year of borrowing and the preceding year. The State of Telangana has fulfilled all the three conditions.
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