Borrowing by state govt 11% lower than last year: Care Ratings

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The cost of borrowing for states declined by 7 basis points in weighted average pricing of their debt to a three-week low of 6.80%. An increase in the draw-down from the ways and means advances (WMA) was witnessed again. In FY22 market borrowings by the states were at 11% less, than FY21. Cumulatively Rs 2.92 lakh crore was raised by 25 states and Delhi. This amount was Rs 3.27 lakh crore a year ago by 27 states and two Union territories.

The weighted average cut-off of state development loans declined by 7 bps to 6.80%, according to Icra Rating and Care Ratings. This was led by a 9 bps decline in the same to 6.78% from 6.87% last week for the 10-year instrument.

Around eight states raised Rs 8,910 crore and accepted the notified amount. The borrowings so far are 12% lower than the borrowings as per the indicative auction calendar for this period.

Karnataka, Odisha, and Tripura were supposed to raise Rs 9,600 crore however they have not tapped the market for funds.

Maharashtra, Nagaland and Tamil Nadu participated in the auction. The five states that raised funds have not been part of the indicative borrowing calendar.

Due to revenue shortfalls, the debt raising of states is slow this year. The states are also following RBI’s financial accommodation by way of short-term borrowing through special drawing facility and WMA (ways and means advances).

The WMA borrowings were higher by 35% at Rs 92,000 crore between May-July. With lockdown easing and GST compensation shortfall, the borrowings began moderate from mid-July and through August.