‘State recording lower debt to GSDP ratio’

The State government has said that prudent fiscal measures and effective management of finances has ensured that the State registered lowest debt to GSDP ratio in the country with average debt to GSDP ratio at 17.2% during the five year period between 2014-19.

The ratio in respect of progressive States like Gujarat and Tamil Nadu was far higher at 21.1% and 21.08% respectively while that of other States like Maharashtra - 17.87% and Karnataka - 18.04% too was higher than that of Telangana. West Bengal and Punjab reported the highest debt GSDP ratio of 38.32% each during the period.

Highlighting the issue in the Socio Economic Outlook 2022, the government said as market borrowings were the predominant form of financing the fiscal deficit, it was important to ensure that borrowing costs were low. A recent RBI working paper – States’ Fiscal Performance and Yield Spreads of Market Borrowings in India – showed that better fiscal and market performance as linked to lower yield spread (lower cost of borrowing).

The study evaluated the development of States’ Performance Composite Index which was composed of fiscal, debt and market indicators examining the relationship between the index and field spreads. The inter-State variations in the yield spread across time were attributed to perceived State-specific credit risk and liquidity, the paper said highlighting Telangana’s able financial management.

The paper highlighted that in 2018-19, as compared to other major States, Telangana could borrow at the lowest rates (30 – 40 basis points over the yield on the Central government securities of similar maturity). The average figure for all States was 55 basis points. Similarly, Telangana issued the longest tenor security of 30 years maturity indicating the good performance in the management of maturity profile of the debt.

“About 49% of the outstanding State government securities are going to mature only after 2036 as per the latest RBI State Finances report,” the Socio Economic Outlook 2022 said. The government at the same time took major decisions for resource mobilisation in 2021-22 and the Cabinet sub-committee on resource mobilisation recommended revision of market values of lands and registration charges across the State.

The revision was necessitated due to significant increase in land values but no corresponding increase in registration charges for several years. The revision of market values and stamp duty rates came into effect from July 22 last year leading to doubling of monthly revenue from July to December on an average.

The market values of agricultural lands, plots and apartments were hiked again on January 31 and the revised market values came into effect from February 1.

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Printable version | Mar 31, 2022 10:29:10 am |