PM Modi lauds Centre-state cooperation amid pandemic

New Delhi: Prime Minister Narendra Modi on Tuesday praised the cooperation between the Centre and states amid the coronavirus pandemic saying that they were able to borrow significantly more in 2020-21 and raise an extra Rs 1.06 lakh crore.

In a LinkedIn blog, Modi said that 23 states availed of additional borrowings of Rs 1.06 lakh crore out of a potential Rs 2.14 lakh crore. This significant increase in the availability of resources was made possible by an approach of Centre-State bhagidari.

When we formulated our economic response to the Covid-19 pandemic, we wanted to ensure that our solutions do not follow a 'one size fits all' model," the PM wrote in the blog "Reforms by Conviction and Incentives".

"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," he said.

Modi said in May 2020, as part of the Aatmanirbhar Bharat package, the Centre announced that state governments would be allowed enhanced borrowing for 2020-21. An extra 2 per cent of gross state domestic product (GSDP) was allowed, of which 1 per cent was made conditional on the implementation of certain economic reforms, he added.

This was a nudge, which the PM called "rare in Indian public finance", 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," he added.