Table of Contents
States Urge Centre for Improvements in Interest-Free Loan Scheme
Significance
The 50-year interest-free loan scheme for pursuing capital investment projects is a significant initiative by the Union government to support States in their development endeavors.
Features
The scheme provides States with a substantial amount of ₹1.3 lakh crore annually for capital investment projects.
Objectives
The primary objective of the scheme is to boost infrastructure development in States and promote economic growth.
Effects
The scheme has positively impacted various sectors by enhancing the overall infrastructure and creating job opportunities in the States.
Pros and Cons
One of the pros of the scheme is that it provides States with financial assistance without any interest burden. However, some may argue that the scheme could lead to dependency on central funding in the long run.
Fun Fact
Did you know that the Scheme for Special Assistance to States for Capital Investment was first launched in 2020-21?
States have urged the Centre to make some improvements in the 50-year interest-free loan scheme for pursuing capital investment projects, under which the Union government has proposed to give them ₹1.3 lakh crore this year, the same amount as 2023-24.
Ministers from States made suggestions related to the ‘Scheme for Special Assistance to States for Capital Investment’, during pre-Budget consultations chaired by Union Finance Minister Nirmala Sitharaman on June 22.
Ms. Sitharaman also heard out several suggestions from State Ministers regarding the Union Budget 2024-25 likely to be presented next month, along with requests specific to their regions, and assured them that their ideas and inputs will get “due consideration by the Union Government during the preparation of Union Budget 2024-25”.
Apart from Finance Ministers from several States, the meeting was attended by the Chief Ministers of Goa, Meghalaya, Mizoram, Nagaland, and Sikkim, along with the Deputy Chief Ministers of Bihar, Madhya Pradesh, Odisha, Rajasthan and Telangana.
“In her remarks, the Union Finance Minister underlined Union Government’s support to States through timely tax devolution, Finance Commission grants, and arrears of GST Compensation being provided for providing stimulus to growth,” the Finance Ministry said in a statement.
On the ‘Scheme for Special Assistance to States for Capital Investment’, Ms. Sitharaman iterated that while most of the loans under it are untied, a part of the allocation is conditional and linked to citizen-centric reforms by States and sector-specific capital projects. She requested the States to avail these loans by fulfilling those requisite criteria.
Multiple Choice Questions
- What is the purpose of the ‘Scheme for Special Assistance to States for Capital Investment’ mentioned in the article?
A) To provide interest-free loans to States for pursuing capital investment projects
B) To provide grants to States for social welfare programs
C) To provide subsidies to States for agricultural development
D) To provide tax breaks to States for attracting foreign investment
Correct Answer: A) To provide interest-free loans to States for pursuing capital investment projects
Explanation: The scheme aims to provide interest-free loans to States for capital investment projects.
- What improvements have States urged the Centre to make in the 50-year interest-free loan scheme?
A) Increase the loan amount
B) Decrease the loan duration
C) Provide conditional loans
D) Provide subsidies instead of loans
Correct Answer: A) Increase the loan amount
Explanation: States have urged the Centre to make improvements in the 50-year interest-free loan scheme by increasing the loan amount.
- Who chaired the pre-Budget consultations where States made suggestions regarding the ‘Scheme for Special Assistance to States for Capital Investment’?
A) Chief Ministers of Goa, Meghalaya, Mizoram, Nagaland, and Sikkim
B) Union Finance Minister Nirmala Sitharaman
C) Finance Ministers from several States
D) Deputy Chief Ministers of Bihar, Madhya Pradesh, Odisha, Rajasthan and Telangana
Correct Answer: B) Union Finance Minister Nirmala Sitharaman
Explanation: Union Finance Minister Nirmala Sitharaman chaired the pre-Budget consultations where States made suggestions regarding the ‘Scheme for Special Assistance to States for Capital Investment’.
- What is the main role of the Union Finance Minister in relation to the Union Budget 2024-25?
A) To allocate funds to States for capital investment projects
B) To hear suggestions from State Ministers and ensure they are considered in the budget preparation
C) To implement citizen-centric reforms in States
D) To provide tax devolution and Finance Commission grants
Correct Answer: B) To hear suggestions from State Ministers and ensure they are considered in the budget preparation
Explanation: The Union Finance Minister hears suggestions from State Ministers regarding the Union Budget and ensures they are considered during the preparation process.
- What criteria are States required to fulfill in order to avail loans under the ‘Scheme for Special Assistance to States for Capital Investment’?
A) Implement social welfare programs
B) Link loans to citizen-centric reforms and sector-specific capital projects
C) Receive tax breaks from the Union Government
D) Submit yearly reports on capital investment projects
Correct Answer: B) Link loans to citizen-centric reforms and sector-specific capital projects
Explanation: States are required to fulfill criteria such as citizen-centric reforms and sector-specific capital projects to avail loans under the scheme mentioned.
Brief Summary | UPSC – IAS
During a pre-Budget consultation, State Ministers suggested improvements to the 50-year interest-free loan scheme for capital investment projects proposed by the Union government. Finance Minister Nirmala Sitharaman assured States that their suggestions and inputs for the upcoming Union Budget 2024-25 will be considered. The meeting included Finance Ministers from several States, as well as Chief Ministers and Deputy Chief Ministers from various regions. Sitharaman emphasized the Union Government’s support through tax devolution, Finance Commission grants, and arrears of GST Compensation to stimulate growth. The ‘Scheme for Special Assistance to States for Capital Investment’ offers untied loans with conditions tied to citizen-centric reforms and sector-specific projects. States were urged to fulfill these criteria to access the allocated loans.
