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Allow states to raise money from global markets, Naidu urges Centre

Business Bureau in New Delhi

Andhra Pradesh Chief Minister N Chandrababu Naidu today said states willing to rush ahead with economic reforms should be given freedom to raise money in international and domestic markets.

The central government should not restrict progressive states, their borrowing powers in pursuit of economic reforms, Naidu said at the India Economic Summit in New Delhi today. Proper fiscal management at the state level would be ensured by the electorate who are ready to reward good government.

Naidu regretted that despite participating in the last few successive national governments, the Telugu Desam Party has not been able to convince the central government to devolve more financial powers.

''Only strong states will make a strong centre,'' the TDP leader said adding that revenue raising powers are mostly concentrated in the hands of the central government while the states are responsibile for building social infrastructure, empowerment of local bodies and rural development.

The national government should frame broad guidelines under which states can borrow directly from international markets. The states are now required to take prior approval from the Centre even for World Bank loans.

Naidu called for financial decentralisation to the states and the local bodies. It will enable taking reforms to the lowest level and usher in better social welfare programmes.

''The centre should increase the states' share of gross tax collections to 50 per cent from the current 34 per cent. It will help states to pass on some of the finances to the local bodies,'' he added.

Naidu warned that unless states have a healthy competition in following economic reforms, people would get more impatient with government performance. On the other hand, good governance would be rewarded with another term, he said, citing the TDP's example in Andhra Pradesh.

Strongly coming out in support of financial discipline and increasing decentralisation, the TDP leader said capital markets will certainly reward those who maintain fiscal discipline. ''All states have to compete for foreign direct investment to survive and thrive,'' he added.

Business