States' gross market borrowing likely Rs 4.5 trn in FY18: ICRA

The gross market borrowing of the state governments is likely to rise from Rs 3.7 trillion in 2016-17 to Rs 4.5 trillion in 2017-18 which would exert an upward pressure on state development loans (SDL) yields in the next fiscal, rating agency ICRA said.

"ICRA estimates the state government's gross market borrowings to increase to Rs 4.5 trillion in 2017-18 from Rs 3.7 trillion in 2016-17, on the expectation of rising fiscal deficits led by the pay revision and servicing of the UDAY debt, a spike in debt repayment from FY18 onwards and the exclusion of most state governments from investing in the National Small Savings Fund (NSSF) from April 1, 2016," the agency said in a statement.

ICRA further said the gross market borrowing of all state governments through SDLs in 2016-17, has increased sharply by 27.1 percent to Rs 3.2 trillion (till February 14, 2017) from Rs 2.5 trillion in the corresponding period of last fiscal.

"This rise in SDL issuance in the current year can be attributed to various factors, including the flexibility to some state governments to borrow an additional amount of up to 0.5 percent of gross state domestic product (GSDP), above the anchor of 3.0 percent of GSDP, based on the recommendations of the 14th Finance Commission," it said.