No additional borrowing for states in FY18 after UDAY, farm loan waiver

The payment of interest on the bonds taken by the states under the Ujwal DISCOM Assurance Yojana (Uday) in the current year and the farm loan waiver will affect the states’ fiscal deficits.

Government official told CNBC-TV18 that no state will qualify for the additional borrowing of 0.5 percent under the State Fiscal Responsibility and Budget Management (FRBM) Act as their fiscal position deteriorates. Last year, seven states qualified for the additional borrowing.

Maharashtra and Karnataka are in a better position since their borrowing limits are higher than the farm loan waiver announced by them.

The Centre has indicated that looking at the overall interest burden of states across the board and the farm loan waiver impact coming in for a couple of states that may not be feasible in the current year.

States have now pinned their hopes on good onset of monsoon and some bump up in state revenues due to rolling out of GST as most states are now consumption oriented states which may help them in improving their fiscal position.

The overall financial positions do not look good for most of the states at the moment.