Assam is effectively utilizing the interest-free loans provided by the Central Government, according to Finance Minister Nirmala Sitharaman. This initiative is considered a transformative step towards developing sustainable, multimodal connectivity and celebrating Assam's cultural identity through urban design.
The Central Government has provided ₹3.6 lakh crore as 50-year interest-free loans to 22 states to strengthen state finances and support development initiatives. These loans go beyond the constitutionally mandated transfers under the Finance Commission and reflect Prime Minister Narendra Modi's understanding of states’ development challenges. The Finance Commission of India is a constitutional body established under Article 280 to recommend how the Centre's revenues should be distributed between the Union and the states. It determines the vertical devolution (share of taxes between Centre and states) and horizontal devolution (distribution among states), based on factors such as population, income levels, and fiscal performance.
The Centre has allocated ₹1.5 trillion for these loans for FY26, aiming to boost public infrastructure spending and support state-level capital projects. Around 60% of this amount will be unconditional or linked to infrastructure spending, while the remaining 40% will be tied to reforms that states undertake. Union territories were included under the scheme in FY26.
The scheme was introduced in 2020-21 and has been crucial in driving capital spending by states and stimulating the economy post-pandemic. States' total outstanding liabilities under the scheme are expected to exceed ₹3.5 trillion by the end of FY25.
FM Sitharaman urged states to make full use of the Centre's special assistance to states for capital expenditure (SASCE) scheme. She emphasized that the economic recovery of the nation is dependent on the states' recovery as well. These funds come without interest, and repayment is due only after five decades, and even that may be waived. The focus is on creating long-term public assets, not short-term handouts.
India's capital investment grew to 4.1 per cent (including states) of the GDP in 2024-25 from 1.7 per cent in 2013-14. In 2024-25, it reached 3.2 per cent of our GDP with effective capital expenditure being actually 4.1 per cent. 22 states have actually used the interest-free loans, resulting in recording more than 10 per cent growth in capital expenditure from their own resources.
