State govt borrowings dip in FY22
State government borrowings plunged 54% in the first two months of 2021-22 from a year ago despite the coronavirus pandemic wrecking their finances, as many states turned to cash reserves, tax transfers and central bank advances rather than market borrowings.
Twelve states and one Union territory borrowed a total of ₹37,200 crore during April and May, Care Ratings said in a May 13 report, against 22 states and one Union territory which borrowed ₹81,005 crore in the same period last year.
States like Kerala, Madhya Pradesh, Odisha and Uttar Pradesh which were large borrowers in 2020-21 stayed off the market, while others like Andhra Pradesh, West Bengal, Telangana and Tamil Nadu borrowed less. Only Rajasthan borrowed more than last year.
According to the tentative borrowing calendar, 23 states and one Union territory were to raise ₹81,900 crore between April 8 and May 11. However, only 45% of this amount was raised, by 10 states and one Union territory.
“The lower quantum and fewer number of states undertaking market borrowing so far in the current financial year could largely be ascribed to the lower expenditure undertaken by the states relative to their revenues,” the rating agency said.
Naveen Singh, head of trading at ICICI Securities Primary Dealership, said, “Some states are sitting on cash surpluses; most of them have been dipping into this cash surplus so far. State government borrowing may pick up in the second half. Many states are in lockdown. So, state governments are not in a position to spend much anyway. For now, states are relying on GST share to cover their expenditure.”
Another reason could be that the Reserve Bank of India (RBI) extended the ways and means advances (WMAs) limit of ₹51,560 crore to state governments by six months from March 31 till September 30. The changes were made to help state governments tide over the difficulties during the pandemic. WMAs are temporary advances given by the RBI to states to tide over any mismatch in receipts and payments.