According to the current political context, what do you think is the easiest way for Politicians to woo voters? Unfortunately the answer to that are freebies. To win elections, politicians resort to announcing fiscally impossible schemes, doling out money and waiving off loans left, right and centre. Well, the Union government has found a panacea for this menace. It has dropped the curtain on freebie politics to ensure economic situations never worsen in any state. It is making sure that a catastrophe like Sri Lanka never arises in India.
Huge Boost to Capital Expenditure
The main drawback of freebie politics is that it takes away a huge share of the tax collection. Without enough resources and taxes available in the hands of the government, Infrastructure, which is the backbone of development, suffers drastically. That is why every sensible government tries to increase the outlay on capital expenditure (Capex). Moving on the much needed, right path, the Union government has earmarked Rs 80,000 crores as interest-free loans for States. This corpus will be available to those states that undertake capital works in the current fiscal year.
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The Finance Ministry issued guidelines for implementing the schemes. It said Rs 80,000 crores is reserved for capital works to be undertaken by the States. It has committed to give priority to projects that come under PM Gati Shakti Master Plan.
States will have to submit various details to the Expenditure Department of the Union Finance Ministry. To avail the benefit for investments made this fiscal year, states will have to furnish details like name of the project, capital outlay, and completion period. The states will also have to explain the economic justification for the project and proposed expenditure.
Budget Announcements
In her 2022-23 Budget speech, Finance Minister Nirmala Sitharaman had announced the ‘Special Assistance to States for Capital Investment’ scheme. Under this scheme the states would be given total financial assistance of Rs 1 lakh crore in the form of 50-year interest-free loans for capital investment projects.
The scheme also includes Rs 5,000 crores interest-free loans to incentivise states to undertake privatisation or disinvestment of State public sector enterprises and asset monetisation. To get benefit under this head, the centre will encourage those states that undertake privatisation or do strategic sale along with transfer of management control of state PSUs besides listing of PSUs on the stock exchanges.
Besides all of these loans, allocation would be made for digitisation of the economy. This includes digital payments, completion of optical fibre cable network, and reforms related to building by-laws, town planning schemes, transit-oriented development, and transferable development rights.
The total assistance scheme which has an outlay of Rs 1 lakh crore also includes Rs 4,000 crores for PM Gram Sadak Yojana, Rs 2,000 crores digitisation incentive, Rs 6,000 crores towards urban reforms and Rs 3,000 crores for capital projects on optical fibre cable.
This special 50-year interest free loan is to motivate more and more states to increase their spending on Capex. This is also a direct message to all those states that, for petty freebie politics, dol out freebies and strain the economy of the state. These targeted schemes will be successful in building a resilient infrastructure and herald development to new highs. Additionally sooner or later such schemes can be broadened. This can make sure that the corpus given by the centre to the state as per the Finance committee recommendations can be linked with Capex conditions just like this interest free loan.
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