Tamil Nadu had an outstanding liability of about ₹4.73 lakh crore at the end of March 2022 on funds raised through the issue of bonds. About 32.4%, or about ₹1.53 lakh crore, of the outstanding amounts are coming up for repayment by 2026-27.
To bridge the gap between its income and expenditure or, in other words, fiscal deficit, Tamil Nadu borrows from the market through the issue of State Development Loans (SDLs) and other bonds.
According to the Reserve Bank of India’s annual publication, ‘State Finances: A Study of Budgets of 2022-23’, 45.3% of the outstanding market borrowings are coming up for repayment in 5-10 years, 10.8% in over 20 years, 7% in 10-20 years, while 4.5% is maturing in less than one year.
Tamil Nadu is one of the few States that have been focussing on elongating the maturity profile of their market borrowings, said Aditi Nayar, Chief Economist, ICRA Ltd.
SDLs form a major part of Tamil Nadu’s total outstanding liabilities. According to the data shared in the RBI report, SDLs account for about ₹5.32 lakh crore of the State’s total outstanding liabilities of about ₹7.54 lakh crore estimated at the end of March 2023.
The remaining components of the liabilities include obligations from UDAY bonds and loans from financial institutions.
Last week, the State Finance Department said it was repaying some amounts due on UDAY bonds on February 22, 2023, with interest due up to February 21.
In 2021-22, Tamil Nadu raised ₹87,000 crore through market borrowings, and it repaid ₹14,500 crore, resulting in net borrowings of ₹72,500 crore, according to the RBI.
So far in 2022-23, the State’s net borrowing has been ₹26,153 crore (till October), according to the data. From April-December 2022, the State borrowed ₹49,000 crore, which was lower than the ₹52,000 crore it had borrowed in the same period in 2021.
Tamil Nadu is planning to raise ₹51,000 crore in the fourth quarter (January-March) of fiscal 2022-2023.
The RBI report pointed out that during the first nine months of 2022-23, the actual market borrowings across the States were much lower than the indicative calendar.
States are expected to raise ₹3.41 lakh crore (gross) during January-March 2023. For the remaining part of the year, the quantum of borrowings is likely to be influenced by the size of monthly tax devolution, the release of the pending GST compensation, the disbursement of interest-free capex loans to the States and actual capital spending, it noted.
The total borrowing ceiling for the States in 2022-23 is 4% of the Gross State Domestic Product, inclusive of an additional 0.50% for power sector reforms.
The State government strives to stay within the fiscal deficit target and manage the debt to GSDP ratio within the prescribed limits through revenue augmentation and effective fiscal consolidation, Finance Minister Palanivel Thiaga Rajan said in the recently concluded Assembly session, while presenting the review of trends in receipts and expenditure in relation to the budget estimates for 2022-23.