Centre to release about ₹50,000 cr- ₹70,000 cr of interest-free capex loans to states in Q3, FY25

livemint.com:

Subscribe to enjoy similar stories. New Delhi: The Union government is likely to release ₹50,000 crore to ₹70,000 crore to states as part of its ‘special assistance for capital investment’ scheme in the three months to December (Q3, FY25), to be used for ramping up capital expenditure, two people aware of the matter said.

With both expenditure and growth slowing down during the first two quarters due to the general elections, these funds are aimed at boosting capex spending by states, especially on infrastructure projects in order to aid overall growth. "The disbursement of these interest-free loans has been delayed due to the general elections (during the Q1, FY25 period) and a large chunk of it will be done in Q3, FY25 quarter," the first person mentioned above said, requesting anonymity.

"However, the disbursal of a significant portion of the Capex loan is dependent on the states' performances on certain fronts," the person added. Introduced in FY21, the interest-free loan with a tenure of 50 years has played a vital role in stimulating capital spending by states and catalyzing the overall economy in the aftermath of the pandemic.

In FY24, as many as 16 states opted for the loan scheme—Arunachal Pradesh, Bihar, Chhattisgarh, Goa, Gujarat, Haryana, Himachal Pradesh, Karnataka, Madhya Pradesh, Mizoram, Odisha, Rajasthan, Sikkim, Tamil Nadu, Telangana and West Bengal. Last July, during her budget speech, the finance minister Nirmala Sitharaman said the allocations will stand at ₹1.5 trillion for FY25, up from ₹1.3 trillion targeted in the interim budget.

To be sure, of this amount, a chunk of about ₹88,000 crore, or 58%, is linked to “outcomes and reforms" by states. Reforms states were required to meet to claim a