The states and Union Territories have collectively borrowed ₹7.98 lakh crore from the markets in 2020-21 ending March which is ₹25,393 crore or around 3% less than the indicated debt for the fiscal.
The states and UTs drew down ₹20,641 crore at the last securities auction of the year on Tuesday. The states had indicated to the RBI that they would borrow ₹8.24 lakh crore this fiscal to meet the massive revenue gap due to the lockdowns imposed due to the COVID-19 pandemic.
In FY21, 28 states and two Union Territories have cumulatively raised ₹7.98 lakh crore from markets which is 26% more than ₹6.35 lakh crore in FY20. However, this is ₹25,393 crore less than the borrowings of ₹8.24 lakh crore they planned to raise this fiscal, according to a note by Care Ratings. On an average, the states have drawn down 97% of the borrowings target in FY21.
The borrowing cost for the states spiked at the last auction with the weighted average cost across states and tenures soaring by 39 bps over the past week to 6.60%. At the March 23 auction they had paid only 6.21%.
But this is much lower than they had paid in the early days of the fiscal with Kerala paying 8.96% for a 5-year money worth ₹6,000 crore at the first auction of the year in April. Today, Bengal paid the highest at 6.99% for a ₹4,680 crore.
The cost for the harried states jumped despite a 4 bps decline in the 10-year benchmark yields to 6.76% from last week. The spread between the 10-year state debt and and the GSecs too declined to 59 bps.
States have been borrowing heavily to meet the shortfalls in their finance's consequent to the drop in revenue due to the pandemic. The majority of the states have seen a notable increase in their market borrowing in FY21 over the past year.
There has been a notable year-on-year increase in the market borrowings of large states such as Madhya Pradesh (104%), Kerala (58%), Rajasthan (47%), Karnataka (42%), Maharashtra (42%), Tamil Nadu (41%) and Andhra (21%), according to the data from the agency. However, five states --Arunachal (down 65%), Odisha (less than 60%), Tripura (down 35%), Manipur (down 26%), and Himachal (9% less)-- borrowed less than last year.
But these states together accounted for just 1.6% of the total states' borrowing in FY21. Tamil Nadu, UP, Maharashtra, Karnataka, Bengal and Rajasthan have been the top seven borrowing states, accounting for 52% of the total borrowings.
On an average, states have raised 97% of the market borrowings as per the indicative borrowing calendar for FY21. Twelve states and two UTs have raised more than the indicated debt in the borrowing calendar.
On the other hand, major states like Maharashtra, despite the sizeable borrowings have only raised 61% of the quantum of the indicative borrowings. Uttarakhand and Odisha have raised the least at 50% and 35% respectively.
This story has been published from a wire agency feed without modifications to the text. Only the headline has been changed.
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