Kerala aims to raise Rs9000 cr from market during Q1

By CL Jose

‘State may fail to contain deficits at budgeted levels’

THIRUVANANTHAPURAM/April 06-2022: Kerala is poised to borrow Rs9000 crore from the market during the first quarter, April-June period, as per the weekly schedule for borrowing released by the Reserve Bank of India (RBI).

The aggregate market borrowings by all State governments and Union Territories (UTs) put together during the first quarter add up to Rs1,90,375 crore, and hence Kerala accounts for just 4.73 per cent of the total borrowing during the said period.

Coincidentally, Kerala had borrowed the same Rs9000 crore during the first quarter in the earlier year- FY22, too.

As per the tentative auction calendar for the first quarter of the current year, Kerala plans to borrow Rs1,000 crore on April 11, Rs5,000 crore during May and the remaining Rs3,000 crore in June.

These are tentative auction date and amounts, and the states have every right to alter both dates and amounts as per their convenience after consulting with RBI, which organises these auctions for the states and Union Territories.

Kerala has borrowed Rs27,000 crore from the market last financial year with a big chunk of this, Rs7000 crore, being raised during the last quarter alone, and all these borrowings were for periods above 10 years and going up to 15 years and even 35 years in certain cases.

Market borrowing is not the only mode states resort to for funding their fiscal deficit as is being made out by certain section of the media, meaning that Kerala’s borrowing during 2021-22 was not just Rs27,000 crore, but certainly was the largest borrowing exercise.

As per the borrowing schedule prepared by Kerala for 2021-22, the state was expected to borrow Rs21,256 crore from market, whereas close to Rs6500 crore was expected to have been raised from Provident Fund and Rs1760 crore from the Centre as loan.

Deficits could exceed budget targets

Meantime, India Ratings and Research (Ind-Ra), the leading rating agency, said it believed Kerala’s revenue and fiscal deficits would be higher than budgeted for 2022-23 (FY23).

Ind-Ra believes that there could be a shortfall in receipts and underestimation in revenue expenditure in the budget prepared by the state.

The agency estimates the revenue deficit to be 2.9 per cent of the gross state domestic product (GSDP) as against 2.3 per cent or Rs22,968 crore, budgeted.

Furthermore, it believes the fiscal deficit could rise to 4.4 per cent of GSDP, higher than the budgeted 3.9 per cent of GSDP or Rs39,117 crore.

“Notwithstanding this, it will be within the limits prescribed by the 15th Finance Commission (FC) and agreed upon by the Union Government (4 per cent of GSDP and additional 0.5 per cent of GSDP subject to conditions,” noted Ind-Ra.

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