Context:
Almost 97% of the entire financing of ₹1.25 trillion, provided by the Special Assistance scheme for states, has been approved by the Centre making interest free loans for a period of 50 years available to the states for enhancing capital investments and reforms.
Key Features
Fund Allocation & Utilization
- Total Revised Allocation (FY25): ₹1.25 trillion (originally ₹1.5 trillion).
- Approved Amount (First 10 months): ₹1.22 trillion (~97% of allocation).
- Breakdown of Fund Usage
- ₹55,000 crore: Allocated based on states’ share of central taxes & duties.
- ₹95,000 crore: Linked to reform implementation upon such reforms as:
- Iconic tourism destination development.
- Vehicle scrappage incentives.
- Development of industry.
- Advancement of NCR development.
Desirable Conditions for Assistance
- As in other Centrally Sponsored Schemes (CSSs).
- Transparency in fund management.
- Capital expenditure renderable additional, not alternative, to state budget expenditure.
- Others: Land reforms.
Genesis of the Scheme
- Initiated in FY21, with the initial allocation of ₹12,000 crore.
- FY22: Enhanced to ₹15,000 crore.
- FY23: Increased manifold to ₹1.07 trillion, with ₹27,000 crore contingent on state-specific reforms.
- FY24: Allocation of ₹1.3 trillion, out of which ₹30,000 crore constitutes the outcome-based assistance.
Strategic Implications
- For States
- Increase capital investments in infrastructure, tourism, and industrial development.
- Long-term fiscal space with no immediate debt burden on the states.
- Encourages adherence to central policies & transparency in fund utilization.
- For the Centre
- Ensures uniform economic development across states.
- Encourage state-level structural reforms in governance and urban planning.
- Augment public investment in capital projects aiding economic recovery.
The Special Assistance scheme ensured capital investments biennially, and with reforms implemented, have been a sharper focus on the development of states. The fact that 97% of the funds have been approved is itself a testimony to the efficiency of the scheme in its disbursement, and to the strong fiscal coordination between the Centre and states.
