Background

• In May 2020 as a part of the Aatmanirbhar Bharat package, the government allowed state governments to hike their borrowing limits from 3% to 5% of Gross State Domestic Product (GSDP), translating into an additional borrowing space of Rs 4.28 lakh crore.

• However, the Centre has attached conditions for the increased borrowing space, permitting only 0.5 per cent of GSDP as an unconditional increase. 
• Rest, 1 per cent will be in four tranches of 0.25 per cent, with each tranche linked to expenditure on ‘One Nation One Ration’, urban local body revenues, power distribution, ease of doing business reforms. The last 0.5 per cent to be permitted if at least three of four milestones are reached.

Why in News?

• The Centre has permitted five States to borrow an additional ₹9,913 crore through open market borrowings to meet expenditure requirements amid falling revenues due to the COVID-19 crisis.
• These States are A.P., Telangana, Goa, Karnataka and Tripura. The permission was accorded after these States met the reform condition of implementation of the ‘One Nation One Ration Card’ system.

Reference:

1. https://www.thehindu.com/business/five-states-can-borrow-more-on-reform/article32689192.ece