States borrowing more than Centre

Mumbai: Borrowings for the state governments have risen at a faster rate than that of the central government.

While the Centre has maintained gross borrowings in the range of Rs 580,000-590,000 crore, the borrowings of states have increased progressively to reach Rs 478,300 crore.

In terms of share in total borrowings the state's position has increased from 25.9 per cent in FY14 to 45.6 per cent in FY19.

"The relative importance of state borrowings has increased over the years in terms of claims on the financial system," said Madan Sabnavis, Chief Economist at Care Ratings.

Fifteen states accounted for around 90 per cent of gross borrowings of all states, with varying patterns in their shares in total borrowings.

The states that have borrowed more are Karnataka (increase of 1 per cent), Gujarat (1.2 per cent), Rajasthan (2.7 per cent), Andhra Pradesh (1.2 per cent) and Punjab (1 per cent).

Chhattisgarh, with a share of 2.7 per cent in FY19, had seen a rise in share by 1.6 per cent.

Maharashtra, which was the second largest borrower in the market in FY17 at 10.5 per cent, has lowered its share to 4.4 per cent in FY19. UP and Tamil Nadu have also lowered their share in total borrowings in the last two years. Bihar also witnessed a sharp reduction from 4.6 per cent to 3 per cent in this period.

While the Centre has financed a larger part of the fiscal deficit from other sources, states have increased their market borrowings. For the Centre, it was virtually flat at a CAGR of 0.26 per cent, while for the states, there has been a sharp rise, with a CAGR of 19.5 per cent.

Government borrowings have been increasing over the years with greater fiscal strains showing along the way. Total borrowings of the Centre and states combined have increased from Rs 760,100 crore in FY14 to Rs 1,049,300 crore in FY19. The CAGR for the last five years was 6.7 per cent.