With a very few states likely to be eligible for the additional borrowing, the ceiling for their gross market borrowing limit will rise to Rs 3.5 lakh crore in FY 2016-17 as against the actual borrowings of Rs 2.94 lakh crore in the previous fiscal, according to ICRA.
“With a limited number of states likely to be eligible for the additional borrowing in 2016-17, the ceiling for the gross market borrowing limit of state governments to rise to about Rs 3,500 billion (Rs 3.5 lakh crore) in FY2017 as against actual borrowings of Rs 2,945.6 billion (Rs 2.94 lakh crore) in FY2016,” Jayanta Roy, Senior Vice President, ICRA Limited said.
ICRA said it expects a limited number of states to be eligible to undertake a higher fiscal deficit and raise additional borrowings of up to 0.5 per cent of gross state domestic product (GSDP).
It is above the anchor of 3 per cent of GSDP, as permitted recently by the Central Government of India.
“Based on a sample of 15 non-special category states, ICRA estimates that only Karnataka, Madhya Pradesh and Odisha would be eligible for additional borrowing of 0.5 per cent of GSDP in 2016-17, whereas Gujarat, Telangana and Uttar Pradesh would be eligible for additional borrowing of 0.25 per cent of GSDP,” Roy said.
It added actual borrowings may be lower, given the build up of treasury bills at end-March 2016, which can be utilised to meet the state’ expenditure requirements.
However, if a majority of states revise pay scales in 2016-17 itself, the actual borrowings may be higher than this figure, it added.
The combined gross fresh market borrowing of all states (including Union Territory Puducherry) rose sharply by Rs 537.2 billion to Rs 2,945.6 billion in 2015-16 from Rs 2,408.4 billion in 2014-15.
The Central government has allowed states to raise borrowings in excess of their entitlements during a year. It would be adjusted from their net borrowing limits for the subsequent year.