Centre approves 97% of special assistance scheme funds to states

The amount approved is ₹1.22 trillion.

"Of the ₹1.25 trillion allocated (according to the revised estimates), a third—about ₹55,000 crore—has been earmarked to states (for the ongoing fiscal) based on their share of central taxes and duties," said the first person mentioned above, who didn't want to be named.

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The remaining ₹95,000 crore approved for states is based on their progress in implementing reforms, which include initiatives such as developing iconic tourist centres to global standards, incentivizing old vehicle scrappage, stimulating industrial growth, and advancing the National Capital Region, the person added.

Last July's budget allocated ₹1.50 trillion for the Special Assistance scheme, which was later revised to ₹1.25 trillion in the latest Union Budget.

In addition to specific conditions under different parts of the scheme, states must meet mandatory requirements to qualify for funds. These include full compliance with all Centrally Sponsored Schemes (CSSs) and ensuring transparency in fund management.

Special Assistance Scheme

Launched in FY21 with a ₹12,000 crore allocation, the ‘Special Assistance to States for Capital Investment’ scheme aimed to support states post-pandemic.

The allocation rose to ₹15,000 crore in FY22 and surged to ₹1.07 trillion in FY23, with ₹27,000 crore linked to state-specific reforms.

For FY24, ₹1.3 trillionwas earmarked for the scheme, including ₹30,000 crore as outcome-based assistance.

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The remaining ₹1 trillion carried the same condition as proposed for FY25—states must use the loan to supplement, not replace, their capital expenditure.

Among the other reforms, states must also implement land reforms, build working women’s hostels, improve urban planning, and meet capital expenditure targets to access funds from the central government under the scheme, said the second official cited above, speaking under anonymity.

"The Department of Expenditure releases special assistance to states upon meeting prescribed conditions (for reforms), while reform-based allocations are granted based on recommendations from the relevant nodal ministry," the person added.

UP, MP and Bihar top receivers

Among the states, Uttar Pradesh, Bihar, Madhya Pradesh and West Bengal are the top receivers of central funds under the Special Assistance scheme during the first 10 months of the ongoing fiscal.

During the April-January FY25 period, Uttar Pradesh received ₹13,042 crore, Bihar ₹12,907 crore, Madhya Pradesh ₹10,635 crore, and West Bengal ₹9,729 crore under the scheme.

"There has been an acceleration in the interest-free capex loan approval in the second half of the fiscal to spur state spending on infrastructure and capital projects, supporting overall growth," the second person mentioned above said.

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India's gross domestic product (GDP) growth came in at 5.4% in the September quarter, its slowest in nearly two years, due to slower government spending and falling consumption, especially in urban areas, among other factors.

India's economic growth picked up in the December quarter, rebounding from a September quarter low with 6.2% GDP growth.

A spokesperson of the Ministry of Finance didn't respond to emailed queries.