New Delhi, 2/12: The Centre may deny any leeway to states wanting more headroom to borrow as Prime Minister Narendra Modi’s administration aims to tighten fiscal policy in a bid to assuage global investors, according to people familiar with the matter.
States’ borrowing, including those to undertake power sector reforms, is likely to be capped at 3.5 per cent of their gross domestic product for the fiscal year starting April 1. That is lower than the 4 per cent cap for the current year, said the people who asked not to be named. Finance ministry spokesman didn’t answer to calls to his mobile phone seeking comment.
Some provincial governments are opposed to the cut as it would mean less headroom to borrow especially at a time when revenues could take a hit due to an expected slowdown both home and abroad.
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