New Delhi: The Ministry of Finance has approved an additional ₹15,000 crore in interest-free loans to states for capital expenditure in FY2021–22, reinforcing its push to stimulate economic growth through infrastructure investment.
The Department of Expenditure has issued fresh guidelines under the “Scheme of Financial Assistance to States for Capital Expenditure”, extending a policy first introduced during the pandemic to sustain public investment.
Why Capital Expenditure Matters
The Centre has reiterated that capital expenditure plays a critical macroeconomic role by:
- Generating employment, particularly for poor and unskilled workers
- Delivering a high multiplier effect across sectors
- Enhancing productive capacity of the economy
- Driving long-term economic growth
The scheme was initially launched in FY2020–21 despite fiscal pressures, with ₹11,830.29 crore disbursed out of an allocated ₹12,000 crore, helping states maintain investment momentum during COVID-19 disruptions.
Three-Part Structure of the Scheme
For FY2021–22, the scheme has been expanded and structured into three components:
Part I: Support for North-East and Hill States
- Allocation: ₹2,600 crore
- ₹400 crore each for Assam, Himachal Pradesh, and Uttarakhand
- ₹200 crore each for other eligible states
Part II: Allocation for Other States
- Allocation: ₹7,400 crore
- Distributed based on states’ share of central taxes as recommended by the 15th Finance Commission
Part III: Incentives for Asset Monetisation
- Allocation: ₹5,000 crore
- Incentivises:
- Infrastructure asset monetisation
- Disinvestment and listing of State Public Sector Enterprises (SPSEs)
- States can access loans ranging from 33% to 100% of proceeds generated
Push for Asset Monetisation and Infrastructure Pipeline
The scheme strongly aligns with the government’s infrastructure strategy, particularly the National Infrastructure Pipeline.
Asset monetisation is positioned as a key lever to:
- Unlock value from existing public assets
- Reduce maintenance and holding costs
- Redirect capital toward new infrastructure projects
Utilisation of Funds
States are required to deploy funds for:
- New and ongoing capital projects
- Settlement of pending dues in infrastructure works
The objective is to ensure long-term economic benefits while accelerating project execution at the state level.
