- The 15th Finance Commission recommended flexibility in states' fiscal deficit limits, allowing for additional borrowing capacity linked to specific reforms. - A key reform area identified was the power sector, particularly focusing on reducing Aggregate Technical and Commercial (AT&C) losses and bridging the gap between the cost of supply and the revenue realized by discoms. - An additional borrowing ceiling of 0.5% of GSDP was linked to performance criteria in the power sector.
In accordance with the recommendation of the 15th Finance Commission, states will be allowed a fiscal deficit of 4.0% of GSDP of which 0.5% will be tied to reform the following sector.
Asked in TNPSC CS Prelims 2024 · Topic: Fiscal Policy & Revenue (Fiscal Federalism: Centre-state financial relations and Finance Commissions)
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