Report says, most states are likely to be in better fiscal health and this financial year as 20 of them are collectively carrying forward Rs 2.6 lakh crore borrowed in FY21 to this fiscal.
The pandemic and the resultant financial crises, the Centre allowed states to borrow up to 5 per cent of their gross state domestic product (GSDP) resulting in an aggregate borrowing of Rs 8.5 lakh crore, in FY21 as they faced massive drop in revenues and higher expenses towards supporting the people hit by the lockdowns.
Total of 23 states and Delhi have tapped the market so far and raised Rs 2.18 lakh crore as of August 10, as against Rs 2.45 lakh crore borrowed same time last year.
The total debt of the 28 states in FY21 would be Rs 10.6 lakh crore, of which Rs 8.5 lakh crore were their market borrowings and the left loans from the Centre.
Nayar said, "most states presented their FY22 budgets prior to the second wave and the associated restrictions resulted in a combination of lower than projected revenue and GSDP, as well as higher than forecast expenditure, leading to the eventual higher fiscal deficit, exceeding the budgeted 3.4 per cent, similar to the slippage seen in FY21"
The size of the permitted borrowings for FY21, as well as the carried forward portion, is effectively linked to FY21 GSDP estimate, based on a formula that could not account for the economic reduction caused by the pandemic.