States’ borrowings skyrocket due to coronavirus; these five states borrowed more than double this year

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August 12, 2020 1:52 PM

Karnataka, Maharashtra, Nagaland, Sikkim, and Tamil Nadu are the states which borrowed massively this year.

state borrowing, borrowings of states, state revenue, nirmala sitharaman, GSDPBetween 7 April and 11 August, Karnataka borrowed 5 times more funds while Maharashtra borrowed nearly three times more funds than the previous year.

On the back of a severe economic crisis due to the coronavirus pandemic, five states of India have more than doubled their borrowings in the current year. Karnataka, Maharashtra, Nagaland, Sikkim, and Tamil Nadu are the states which borrowed massively this year. Between 7 April and 11 August, Karnataka borrowed 5 times more funds while Maharashtra borrowed nearly three times more funds than the previous year, according to a report by Care Ratings. The sharp fall in revenues consequent to the pandemic led lockdowns since end-March has seen state governments increasingly tapping the markets though the issue of SDLs to meet their funding requirements, it added.

13 out of the 26 states that have issued SDLs so far in the current financial year have seen their borrowings increase by over 50 per cent, compared with the corresponding period of
2019. In the light of a severe economic crisis, Finance Minister Nirmala Sitharaman had raised borrowing limits for states for the current fiscal to 5 per cent of gross state domestic product (GSDP) from 3 per cent at present, allowing them a fiscal headroom of Rs 4.28 lakh crore, subject to their efforts in carrying out specific reforms.

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Revenue deficit grants of Rs 12,390 crore were also given on time to the states in April and May despite the centre’s stressed resources. Adding to it, the advance release of the State Disaster Relief Fund (SDRF) of Rs 11,092 crore was released in the first week of April, along with Rs 4,113 crore released from the health ministry for direct anti-Covid activities.

Meanwhile, the Reserve Bank of India (RBI) had increased Ways and Means Advance limits of states by 60 per cent and the number of days state can be in continuous overdraft had also been increased from 14 days to 21 days. Further, the number of days state can be in overdraft in a quarter had been increased from 32 to 50 days.

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