STATES’ dependence on market borrowing to finance their fiscal deficit increased to 91 per cent in the financial year ended March 2019, says a report. In FY19, states’ budgeted fiscal deficit was around 2.5 per cent or Rs 4,86,500 crore and budgeted borrowing from the market stood at Rs 4,40,700 crore. In FY18, the budgeted fiscal deficit of states was Rs 5,14,300 crore and the budgeted market borrowing was Rs 3,85,300 crore, representing a share of 75 per cent. “The share of (market) borrowings (of states) has increased to a high of 91 per cent in FY19,” Care Ratings said in a report. According to revised estimates, states borrowed Rs 4,78,300 crore from the market in FY19.
The report further said in FY19, the Centre’s dependence on market borrowings to finance its fiscal deficit has come down as there has been recourse taken under the National Small Savings Fund (NSSF). In the fiscal ended March 2019, the Centre’s budgeted fiscal deficit was Rs 6,24,300 crore and the market borrowing was Rs 3,99,100 crore.
The Centre’s share of market borrowing was 63.9 per cent in FY19 as against 70 per cent in FY18. In FY19, the Centre’s gross borrowings stood in the range of Rs 5,80,000-5,90,000 crore while in case of states it increased progressively to reach Rs 4,78,300 crore. In terms of share in total borrowings, the states’ position has increased from 25.9 per cent in FY14 to 45.6 per cent in FY19. It said the combined borrowing grew at a compound annual growth rate (CAGR) of 6.7 per cent in the last five years. While the Centre’s market borrowing grew flat at a CAGR of 0.26 per cent, borrowing by the states rose sharply at a CAGR of 19.5 per cent in the last financial year, the report said.
The report also said over the last few years, 15 states accounted for around 90 per cent of the total borrowings of all states put together. These 15 states include Uttar Pradesh, Tamil Nadu, West Bengal, Karnataka, Gujarat, Rajasthan, Andhra Pradesh and Telangana. The report further said the cost of borrowing for all states has gone up consistently in the past three years. In FY19, the weighted average yield for all states was 85 basis points higher at 8.33 per cent compared to 7.48 per cent in FY17. Out of the 29 states, 12 had lower while 17 witnessed higher cost of borrowing than the average for all states at 8.33 per cent in FY19.