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States’ indicative borrowing for fourth quarter higher than forecast

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Illustration by Binay Sinha

States’ indicative borrowing for the fourth quarter of the current financial year was higher than expectations, said market participants. States plan to borrow up to Rs 4 trillion in the last quarter of 2023-24.


“Despite the additional tax devolution released to the states in December 2023, the states’ indicative borrowing for Q4 is appreciably higher than our forecast of Rs 3.5 trillion. It is possible that some states have indicated an amount equivalent to their available headroom to borrow, even though their actual requirement may be lower.  Two states alone have indicated an 

aggregate issuance of around Rs 1.2 trillion in Q4, boosting the overall borrowing figure,” said Aditi Nayar, chief economist at ICRA.


The Centre released Rs 1.46 trillion to states through two installments in December. The government transferred the amount to states as tax devolution for financing various social welfare measures and infrastructure development schemes. Meanwhile, the Centre plans to borrow Rs 3.93 trillion through treasury bills (T-bills) in the last quarter. According to the calendar released on Friday, the government will borrow Rs 1.1 trillion through 91-day T-bills, Rs 1.6 trillion through 182-day T-bills, and Rs 1.2 trillion through 364-day T-bills.  “The yield spread between corporate bonds and state development loans will widen, the 10-year government security won’t be affected much. State bonds and corporate bonds are frequently considered as substitutes in investment portfolios,” said the treasury head at a private bank.

In the second quarter, states had borrowed Rs 1.9 trillion, which was about 80 per cent of the indicated amount. In the first quarter, states had borrowed 84 per cent of the notified amount of Rs 1.9 trillion.

During the October-December period, states aimed to issue bonds worth Rs 2.37 trillion.

First Published: Dec 29 2023 | 11:54 PM IST


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