TN leads in borrowings, exceeded the target

At Rs.54,000 crore, Tamil Nadu leads the country in its borrowing with Rs.5,000 crore being taken in excess till October 3 this fiscal, said Bank of Baroda in a report.

According to the report, the most significant increase in actual borrowing compared to planned borrowing was by Andhra Pradesh (+Rs 8,500 crore), Telangana (+Rs 6,300 crore) and Tamil Nadu (+Rs 5,000 crore).

“In FYTD24 state governments have together raised Rs 3.8 lakh crore from the markets so far (till October 3). Of this amount, Rs 2.1 lakh crore (about 56 per cent) was raised in Q2FY24 (July-September 2023) by 23 states. Notably, this is slightly lower than Rs 2.4 lakh crore planned in the indicative calendar,” Sonal Badhan, Economist, Bank of Baroda said in the report.

State governments recently concluded their borrowing program for Q2FY24 and announced planned borrowing for Q3FY24.

According to Badhan, in Q3, states have projected to raise another Rs 2.4 lakh crore from the markets. “With this, total planned borrowing for states in FYTD24 (April-December) stands at Rs 6.7 lakh crore, of which Rs 3.8 lakh crore has been raised till 3 October 2023.

“The cost of borrowing for states in FYTD24 remained 17-35bps higher than G-Sec rates, and ranged from 7.31 per cent (Gujarat) to 7.48 per cent (Uttarakhand),” the report notes.

Gujarat being one of the better fiscally-managed states was able to raise money through short-term papers also at a lower rate. On the other hand, states with higher fiscal imbalances, like Punjab, Rajasthan, West Bengal, Andhra Pradesh, borrowed through longer-tenured papers to manage cost, the report said.

While Tamil Nadu, Telangana, and Andhra Pradesh also exceeded their targeted level of borrowing in FYTD24, states like Gujarat and Maharashtra borrowed much less than planned.

States like Arunachal Pradesh, Karnataka, Puducherry and Tripura have not borrowed anything from the markets in FYTD24 so far. Indicative calendar for state borrowings in Q3FY24 (Oct-Dec) shows that 26 states will collectively raise Rs 2.37 lakh crore, with about 54 per cent of the borrowing expected to be raised by five states alone — Uttar Pradesh, Karnataka, West Bengal, Maharashtra and Tamil Nadu.

Other major borrowers may include Madhya Pradesh, Rajasthan, Andhra Pradesh, Bihar, Telangana, Haryana and Punjab, the report notes.

In comparison, the central government raised money in H1FY24 through long-term borrowing at an average yield of 7.2 per cent. Other instruments for borrowing such as weighted average lending rate (WALR) show that cost of borrowing from scheduled commercial banks (SCB) was at 9.47 per cent (as of August 2023) and corporates with AAA rated 10 year bonds could raise money at 7.64 per cent in Q2.

In FYTD24, WALR has increased by 15bps for SCBs and by 13bps for public sector banks, the report said.