Most states signal heavy borrowings in fourth quarter: study 


Most state governments have indicated large borrowings for the fourth quarter of the current financial year ending in March due to lower borrowing limit for FY23 and challenges related to expiry of Goods and Services Tax (GST) compensation, showed a study. 

Twenty-seven states/UTs have indicated large borrowings of Rs. 3.1 trillion for the fourth quarter of FY22, 27.6% higher than the same time a year ago, said an analysis by rating agency ICRA Ltd.  

This comes after a 16.1% year-on-year contraction in gross State Development Loan (SDL) issuance to Rs. 4.7 trillion in the first nine months of FY22.  

“The large indicated borrowing may have been led by concerns related to a potential moderation in the states’ borrowing limit relative to gross state domestic product (GSDP) in FY2023 and the likely discontinuation of the Goods and Services Tax (GST) compensation by end-June 2022. In our view, the actual SDL issuance in the fourth quarter of FY22 could be lower than indicated, in line with the trend seen in recent quarters, and based on our expectation of higher-than-budgeted tax devolution in FY2022,” the rating agency said. 

Karnataka has indicated the highest borrowing of Rs. 500 billion among the states for the fourth quarter. Madhya Pradesh Manipur and Odisha have not indicated any borrowing for the fourth quarter while the issuance by Rajasthan, West Bengal, Kerala and some other states has been indicated to contract in the fourth quarter on an annual basis.  

Gross SDL issuance in FY22 is pegged at Rs. 7.8 trillion, 3% lower than in  FY2021. Karnataka has indicated the highest borrowing of Rs. 500 billion among the states for the fourth quarter.

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