Fifteen states on Tuesday raised a total of ₹17,783 crore at the auction of the State government securities or state development loans (SDLs). While Gujarat accepted an additional ₹500 crore over the notified amount of the auction, Punjab did not accept any amount.
“So far, in the current fiscal year [7 April’20 – 23 March’21], 28 States and 2 UTs have cumulatively raised a total of ₹7.78 lakh crore via market borrowings, 28% more than the borrowings in the corresponding period of 2019-20 [₹6.07 lakh crore],” CARE Ratings said in a report.
The States have collectively so far utilised 94% of the scheduled market borrowings of ₹8.24 lakh crore as per the indicative calendar for 2020-21.In 2019-20, the States had raised an aggregate of ₹6.35 lakh crore, it said.
As per the report, there has been a sharp fall in the cost of borrowings by the States. The borrowing cost for the State governments at Tuesday’s auction witnessed a sharp decline and fell to the lowest level since end August ’20.
“The weighted average cost of borrowing for the state governments through the auction of dated securities; across states and tenures, at 6.21% was 78 bps lower than a week ago [6.99% on 16 March’21],” it said.
The yields of the 10-year securities (weighted average yield across States) also declined to a two-month low of 6.84% and was 31 bps lower than that a week ago (7.15% on 16 March’21).
The spread between the 10-year SDLs and GSecs at 62 bps was 30 bps lower than a week ago, it added.
CARE Ratings said the States and UTs had been resorting to higher market borrowings to meet the shortfalls in their finances consequent to the drop in their revenues due to the lockdown-led disruptions in economic activity, along with the increase in expenditure incurred for controlling and mitigating the impact of the pandemic.
“The majority of the States have seen a notable increase in their market borrowing in the ongoing financial year as against a year ago,” it said.
For example, there has been a notable year-on-year increase in the market borrowings of large States such as Madhya Pradesh (118%), Rajasthan (53%), Karnataka (50%), Maharashtra (42%), Tamil Nadu (42%), Kerala (41%), Telangana (27%), Andhra Pradesh (22%) and Uttar Pradesh (14%).
Five States that have borrowed less than the corresponding year earlier period. These include Arunachal Pradesh (by 65%), Odisha (by 60%), Tripura (by 35%), Manipur (26%), and Himachal Pradesh (3% less). These States together accounted for about 1.6% of the total state government borrowing so far in 2020-21, it said.
Tamil Nadu, Uttar Pradesh, Karnataka, Maharashtra, Rajasthan, West Bengal and Andhra Pradesh have been the top seven borrowing States, accounting for 60% of the total borrowings thus far in 2020-21, the report said.
