In his first interaction with state finance ministers, Union finance minister Jaswant Singh promised to put in place a committee of finance ministers to address the problems of state finances. Ministers who met the Union finance minister after a conclave on the introduction of the value-added tax, asked the central government to advise the Reserve Bank of India to relax the overdraft limit for states.
However, the central government would have a problem in advising the RBI to do so, since it is an independent body, sources said.
The states also demanded that they should be allowed to approach the markets on tap. They told Jaswant Singh finance minister states should have this leeway to redress the mismatch between their receipts and expenditure and also take advantage of the dipping interest rates to swap their high-cost debts.
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They suggested that instead of the pooled financing by the RBI, they should be allowed to tap the markets, individually.
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