States’ borrowings jump 76% to almost ~2 trillion this year

States reeling from massive revenue losses because of lockdowns have front-loaded their borrowings by a whopping 76 per cent so far this fiscal year to ~1.93 trillion, says a report.

The front-loading has been on the back of the Centre relaxing the ways and means advances norms to manage cash-flow mismatches because of the pandemic, says a report by CARE Ratings.

In addition, the Centre has also relaxed the fiscal deficit target from 3 to 5 per cent.

“Between April 1 and July 14, the states’ market borrowings have jumped to ~1.93 trillion, which is 76 per cent higher than the corresponding period last fiscal year,” says the report.

The aggressive borrowings will further shoot up the outstanding debt of all the states, which has more than doubled to ~52.6 trillion in FY20, growing at an annual rate of 14.3 per cent between FY15 and FY20, notes the report.

The outstanding debt has almost doubled in the past five years to ~52.6 trillion and the annual spike rate is much faster than the Centre’s outstanding internal debt, which clipped at 10 per cent during the same period.

Outstanding debt of the states includes market borrowings, power sector-specific Ujwal DISCOM Assurance Yojana (UDAY) bonds, funds borrowed from the National Social Security Fund, banks,

other financial institutions, ways and means advances, loans from the Centre, provident funds, reserve funds, and other contingency funds.

Of the total debt, as much as 72 per cent is with the top 10 states. The list is led by Uttar Pradesh, with an outstanding debt of ~6 trillion in FY20, accounting for 11 per cent of total debt of all the states, it said.