Exclusive: India’s 28 states’ debt balloons to Rs 59.6 lakh crore, trebled in 10 years: CAG Report

According to the report, the total public debt (internal debt and loans and advances from the Centre) of the 28 states was Rs 59,60,428 crore at the end of FY 2022-23 — or 22.96 per cent of their combined Gross State Domestic Product of Rs 2,59,57,705 crore. GSDP is the value of all finished goods and services produced within a state’s geographical boundaries.

“Compared with the total public debt of the states in 2013-14 of Rs 17,57,642 crore, debt in FY 2022-23 has increased by 3.39 times and from 16.66 per cent of GSDP to 22.96 per cent of GSDP,” the report said.

According to the report, at the end of 2022-23, the highest debt-to-GSDP ratio of 40.35 per cent was recorded in Punjab, followed by Nagaland (37.15 per cent) and West Bengal (33.70 per cent) (see chart). The lowest ratio was recorded in Odisha (8.45 per cent), Maharashtra (14.64 per cent) and Gujarat (16.37 per cent).

“As on 31st March 2023, eight states had public debt liability of more than 30 per cent of their GSDP; six states had public debt liability of less than 20 per cent of their GSDP and remaining 14 states had public debt liability between 20 to 30 per cent of their respective GSDP in FY 2022-23,” the report said.

The states’ total debt in 2022-23 was 22.17 per cent of the country’s Gross Domestic Product (GDP), which stood at Rs 2,68,90,473 crore, said the report.

The Public Debt of states includes loans raised from open market through securities, treasury bills, bonds, etc.; loans from State Bank of India and other banks; Ways and Means Advances (WMA) from Reserve Bank of India, besides loans from financial institutions such as Life Insurance Corporation of India (LIC) and National Bank for Agriculture and Rural Development (NABARD).

As percentage of revenue receipts, the states’ total debt ranged between 128 per cent (FY 2014-15) and 191 per cent (FY 2020-21). And as percentage of total non-debt receipts for the same period, it was between 127 and 190 percent, the report said.

“On an average, public debt of the states has been about 150 per cent of their revenue receipts / total non-debt receipts. Similarly, public debt has ranged between 17-25 per cent of the GSDP and on an average, 20 per cent of the GSDP. The marked increase of 4 per cent, from 21 per cent of GSDP in FY 2019-20 to 25 per cent in FY 2020-21 is attributable to decrease in GSDP in FY 2020-21 being Covid year. The increase in loans from the Union Government during the period 2020-21 to 2022-23 was on account of back-to-back loans in lieu of GST compensation shortfall and special assistance as loan to states for capital expenditure,” the report said.

Observing that the “golden rule of borrowing” suggests that the government should borrow only to invest or capitalise and not to meet its operating cost/ current spending, the report highlighted that 11 states used borrowed money to finance their current expenditures.

“Net borrowings during a year reflect the difference between gross borrowings and repayments made. A comparison of the capital expenditure and net receipt of public debt by the states in FY 2022-23 suggests that in 11 states (Andhra Pradesh, Assam, Bihar, Haryana, Himachal Pradesh, Kerala, Mizoram, Punjab, Rajasthan, Tamil Nadu, and West Bengal), capital expenditure was less than the net public debt receipts,” the report said.

“This could be due to part of debt receipts meeting the revenue deficit. In the case of Andhra Pradesh and Punjab, capital expenditure was as low as 17 per cent and 26 per cent of the net borrowings and in the case of Haryana and Himachal Pradesh, about 50 per cent,” the report said.

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