State Cabinet approves amendment to FRBM Act 2005

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Bhubaneswar, Mar 15: An amendment to Odisha Fiscal Responsibility and Budget Management (FRBM) Act, 2005 was approved by the State Cabinet here on Monday.

The amendment will raise the level of fiscal deficit to 3.5 pc of the Gross State Domestic Product (GSDP) from 3 pc presently.

The decision would give an additional leeway to the state government to go for higher borrowing for meeting its rising capex.

According to the recommendations of the 14th Finance Commission, states with debt-GSDP ratio below 25 pc and interest to revenue receipts ratio not exceeding 10 pc can relax the fiscal deficit level by an additional 0.5 pc.

Odisha meets both the criteria and hence, it can stretch the fiscal deficit limit.

Notably, Odisha’s capex has grown substantially over the years and by the end of the current fiscal, it is estimated at 4.3 pc of the GSDP.

The hike in fiscal deficit means that the state government can not only opt for higher borrowing to meet its growing capex targets but also take over the loans of financially stressed PSUs like Gridco.

If the State government chooses to take over 75 pc of Grdico’s loans, it can raise the debt-GSDP ratio by 0.3 pc.

Apart from the amendment to the FRBM Act, the Cabinet also approved the formation of a State Food Commission.

The commission would be chaired by the chief secretary and consist of five members not below the rank of a principal secretary including a member convenor from the department of food supplies and consumer welfare.

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