Explanation:

Recently, Central government has raised the borrowing limits for state governments to five percent from three percent in view of financial crisis due to COVID-19. This however is not unconditional:

• An increase of 0.5 percentage points is unconditional.
• A further increase of 1 percentage point will be released in four tranches of 0.25 percentage points each, linked to state performance in four areas: One nation, one ration card scheme; ease of doing business; reforms of power sector distribution companies; reforms of urban local bodies.
• The final 0.5 percentage points in increased borrowing limit will be unlocked if targets are met in three of the four outlined areas. Hence statement 1st is incorrect.

As per article 293 (3) of the constitution “a State may not without the consent of the Government of India raise any loan if there is still outstanding any part of a loan which has been made to the State by the Government of India or by its predecessor Government, or in respect of which a guarantee has been given by the Government of India or by its predecessor Government.” Hence statement 2nd is correct.