Market borrowings by Uttar Pradesh may surge 12% to Rs 5.73 trillion

The market borrowings by Uttar Pradesh in the next financial year (2024-25) is estimated to surge 12 per cent to Rs 5.73 trillion to keep the public expenditure pool awash with funds.

The projected market borrowing is 22.9 per cent of the estimated gross state domestic product (GSDP) pegged at Rs 25 trillion in 2024-25.

State governments raise funds from the market to meet budgetary requirements by floating government securities (G-sec) and bonds bearing different maturities.

This comes in the backdrop of global institutions deciding to include India’s sovereign bonds in their key indices. This is expected to deepen the domestic debt market and help governments to raise funds for expenditure at lower rates in the future.

 

Meanwhile, in FY21, FY22, and FY23, the respective UP market borrowings stood at Rs 3.55 trillion (20.8 per cent of GSDP), Rs 4 trillion (21.5 per cent) and Rs 4.47 trillion (19.8 per cent), respectively.

The UP market borrowings as a percentage of GSDP has witnessed continuous uptick, thus indicating its utility for the state to raise necessary funds.

As UP is eyeing to become India’s first trillion-dollar economy by 2027, the state government is investing generously in a slew of big ticket infrastructure projects including expressways, highways, airports, and metro rails.

In FY24, the UP market borrowings (per revised budgetary estimates) are pegged at Rs 5.15 trillion, a trickle down from Rs 5.5 trillion in the preliminary budgetary estimates in February 2023.

Tamil Nadu, Maharashtra, West Bengal, UP and Andhra Pradesh are among the leading states in terms of maximum market borrowings, which form a major part of their composite borrowings during the respective years.

The Reserve Bank of India (RBI) regulates such borrowings to ensure fiscal prudence and ensuring such mop-up occurs at low cost sans excessive risk.

The G-sec/bonds are issued through a competitive bidding process conducted by the RBI with primary participants comprising banks, primary dealers, and other financial institutions.

According to the UP Annual Budget documents 2024-25, the government will also raise Rs 18,577 crore loans from financial institutions for public expenditure.