PM hails ‘Centre-State bhagidari’ in ushering ‘reforms by conviction and incentives’ during Covid
New Delhi: Prime Minister Narendra Modi today listed out ‘reforms’ and provided details on “innovative policy making in the time of COVID-19”. In a Linked In post, PM Modi also wrote about partnership between central government and state governments. “Reforms by Conviction and Incentives…my @LinkedIn post on innovative policy making in the time of COVID-19, powered by the spirit of Centre-State Bhagidari,” PM Modi tweeted on Tuesday.
“India has seen a model of ‘reforms by stealth and compulsion’. This is a new model of ‘reforms by conviction and incentives’.
I am thankful to all the states who took the lead in ushering in these policies amidst tough times for the betterment of their citizens,” PM Modi wrote.
- PM Modi said that in the back-drop of the financial crunch amid the ongoing Covid-19 pandemic, states in India managed to raise an extra Rs 1.06 Lakh crore in 2020-21.
- “In this back-drop of financial crunch seen across the world, do you know that Indian states were able to borrow significantly more in 2020-21? It would perhaps pleasantly surprise you that states were able to raise an extra Rs 1.06 lakh crores in 2020-21. This significant increase in availability of resources was made possible by an approach of Centre-State bhagidari,” PM Modi wrote in the post.
- “In May 2020, as part of the Aatmanirbhar Bharat package, the Government of India announced that State Governments would be allowed enhanced borrowing for 2020-21. An extra 2% of GSDP was allowed, of which 1% was made conditional on the implementation of certain economic reforms. This nudge for reform is rare in Indian public finance. This was a nudge, 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,” PM Modi wrote.
- PM Modi listed out four reforms and their characteristics.
- “The four reforms to which additional borrowings were linked (with 0.25% of GDP tied to each one) had two characteristics. Firstly, each of the reforms was linked to improving the Ease of Living to the public and particularly the poor, the vulnerable, and the middle class. Secondly, they also promoted fiscal sustainability,” PM Modi wrote.
- “The first reform under the ‘One Nation One Ration Card’ policy required State Governments to ensure that all ration cards in the State under the National Food Security Act (NFSA) were seeded with the Aadhaar number of all family members and that all Fair Price Shops had Electronic Point of Sale devices,” PM Modi wrote.
- “The main benefit from this is that migrant workers can draw their food ration from anywhere in the country. Apart from these benefits to citizens, there is the financial benefit from the elimination of bogus cards & duplicate members. 17 states completed this reform and were granted additional borrowings amounting to Rs. 37,600 crores,” the Prime Minister wrote.
- “The second reform, aimed at improving ease of doing business, required states to ensure that renewal of business-related licences under 7 Acts is made automatic, online and non-discretionary on mere payment of fees,” PM Modi wrote.
- “The third reform required states to notify floor rates of property tax and of water & sewerage charges, in consonance with stamp duty guideline values for property transactions and current costs respectively, in urban areas,” PM Modi wrote.
- “This would enable better quality of services to the urban poor and middle class, support better infrastructure and stimulate growth. Property tax is also progressive in its incidence and thus the poor in urban areas would benefit the most. This reform also benefits municipal staff who often face delay in payment of wages. 11 states completed these reforms and were granted additional borrowing of Rs. 15,957 crores,” he said.
- The fourth reform was introduction of Direct Benefit Transfer (DBT) in lieu of free electricity supply to farmers. The requirement was for formulation of a state-wide scheme with actual implementation in one district on a pilot basis by year end. Additional borrowing of 0.15% of GSDP was linked to this, PM Modi wrote.
Overall, 23 states availed of additional borrowings of Rs. 1.06 lakh crores out of a potential of Rs. 2.14 lakh crores. As a result, the aggregate borrowing permission granted to states for 2020-21 (conditional and unconditional) was 4.5% of the initially estimated GSDP,” PM Modi said.