States nudged to create infra, focus on urban reforms with funding extension

The Centre has extended a funding helpline to states, looking to push them to undertake reforms and hasten infrastructure creation in their jurisdictions. To fast-track infrastructure development and job creation, it has extended the 50-year interest-free loan by another year while topping the total funding to ₹1.30 lakh crore from about ₹1 lakh crore.

This, however, has been tied to urban reforms, education and consumption, to make up for delayed capex by states due to pandemic.

"I have decided to continue the 50-year interest free loan to state governments for one more year to spur investment in infrastructure and to incentivize them for complementary policy actions," finance minister Nirmala Sitharaman said in her budget speech.


While most of this capex spend will be at the discretion of states, a part will be conditional on states increasing their actual capital expenditure, while some parts will also be linked to, or allocated for, scrapping old government vehicles, urban planning reforms and actions.

States will also be allowed a fiscal deficit of 3.5% of GSDP of which 0.5% will be tied to power sector reforms.

States will also be incentivised to promote alternative fertilizers and balanced use of chemical fertilizers under the PM Programme for Restoration, Awareness, Nourishment and Amelioration of Mother Earth, and to replace old vehicles and ambulances.