With grants and loans from the Union Government getting squeezed continuously, the State Government is forced to depend more on open market borrowings. An analysis of the debt profile of the State Government reveals that loans and advances from the Central Government are going down, whereas share of open market borrowings is on the rise. As on March 31, 2018, the market borrowing was highest among other loans and were on the rise, which, have touched Rs 23, 530 crore and it was only Rs 2,380 crore in 1995-96, sources revealed.
With slowing down of grants from the Government of India since 2014-15, share of market borrowing in the debt profile of the State has been going up after a gap of nine years. It will further increase in coming years as the State Government is forced to go for more loans from market. At least 75 per cent of loan is raised from open markets by the State Government.
Loans from the Centre are hardly less than Rs 8,000 crore, while market borrowing is four times of the debt from the Centre. Reduction in Central borrowing is going down as programme expenditure by the Union Government is coming down except the Externally Aided Project (EAP).
Loan from the State Provident Fund (SPF) is now Rs 21,700 crore and with less contribution from the employees, it is also going down. Decline in SPF contribution is because of gradual reduction in number of contributors to General Provident Fund (GPF) as newly-recruited employees are not contributing to GPF. These employees are governed under National Pension Scheme (NPS). So, loan from the SPF is less than market borrowing.
The National Small Savings Fund (NSSF) is another source for the State Government to raise loans, but these loans are high cost loans. So, the State Government has opted out of NSSF as high cost borrowing is not good for fiscal health of the State. Now, the NSSF loan is about Rs 10,000 crore; and slowly these loans are repaid. The State Government is also going for negotiated loans as more number of infrastructure projects is taken up through the Rural Infrastructure Development Fund of Nabard.
The negotiated loan amount is more than Rs11,000 crore and it is also on the rise as the State is going for more number of roads, bridges and other project for irrigation. In the meantime, the Government of India has passed on Accelerated Irrigation Benefit Programme (AIBP) as loan to the State, which was a grant altogether.