States’ market borrowings jump 55% to Rs 3.75 lakh crore

New Delhi: The states’ market borrowings have jumped 55 percent to Rs 3.75 lakh crore so far this fiscal, or 75 percent of the budgeted amount, with 17 of them raising an additional Rs 22,350 crore from the latest auction of state development loans held on Tuesday. Rising expenses and falling revenue, including the Centre’s inability to pay the GST dues, have been leading states into a debt trap after the pandemic scuppered their finances since the beginning of the fiscal.

Market borrowing

The latest debt raising is Rs 1,200 crore more than the notified amount as Maharashtra and Jharkhand accepted an additional Rs 1,000 crore and Rs 200 crore, respectively. So far this fiscal year (between April 7 and October 6), 28 states and two Union Territories have cumulatively raised Rs 3.75 lakh crore via market borrowings, which is 55 percent more than the borrowings in the same period of FY20 when it stood at Rs 2.43 lakh crore, according to a data analysis by Care Ratings.

As per the borrowing calendar for the first three quarters this fiscal, the states are to borrow Rs 5.07 lakh crore. States have already borrowed nearly 75 percent of this amount. In the first half, their borrowings were 16 percent (Rs 48,115 crore) more than the amount as per the borrowing calendar for the period.

Decline in revenues of States

The lockdown led a sharp decline in the revenues of the states coupled with higher expenditure requirements to mitigate the impact of the pandemic that has severely pressured their finances. To meet funding requirements, states have been increasingly resorting to market borrowings. There has been a significant increase in the market borrowings for states so far in the current financial. To meet funding requirements, states have been increasingly resorting to market borrowings.

Top five borrowing States

While Maharashtra, Tamil Nadu, Andhra Pradesh, Karnataka and Rajasthan have been the top five borrowing states – accounting for 52 percent of the total borrowings so far, Arunachal Pradesh, Bihar, Jharkhand, Himachal Pradesh, Punjab, Manipur, Uttar Pradesh and Tripura saw their borrowing surging between 21 and 343 percent. Karnataka, Maharashtra, Tamil Nadu and Nagaland have seen their market borrowings increase by over 100 percent from the year-ago period, while Madhya Pradesh, Meghalaya, Haryana, Assam, Uttrakhand, Andhra Pradesh, Odisha and Chhattisgarh witnessed a rise of 50-100 percent.Sikkim, Telangana, Jammu and Kashmir, Kerala, Rajasthan, Haryana, Gujarat, Bengal and Mizoram have witnessed an increase of 23-36 percent.