The combined public debt of India’s 28 states has trebled over the past decade, rising from ₹17.57 lakh crore in 2013–14 to ₹59.60 lakh crore in 2022–23, according to a new report by the Comptroller and Auditor General (CAG).
The decadal review of states’ fiscal health, described as the first of its kind, was presented on Friday by CAG K. Sanjay Murthy at the State Finance Secretaries Conference.
The report noted that by the end of FY 2022–23, the total public debt of the states—including internal borrowings and loans from the Centre—stood at ₹59,60,428 crore. This amounted to 22.96% of their combined Gross State Domestic Product (GSDP), valued at ₹2,59,57,705 crore. GSDP reflects the value of all goods and services produced within a state’s boundaries.
The CAG pointed out that compared to 2013–14, when state debt was ₹17,57,642 crore or 16.66% of GSDP, 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, according to a report by the Indian Express.
The CAG report showed that by the end of 2022–23, Punjab had the highest debt-to-GSDP ratio at 40.35%, followed by Nagaland at 37.15% and West Bengal at 33.70%. At the other end, Odisha recorded the lowest ratio at 8.45%, with Maharashtra at 14.64% and Gujarat at 16.37%.
As of March 31, 2023, eight states had debt levels exceeding 30% of their GSDP, six states were below 20%, and the remaining 14 states fell between 20% and 30%, according to the analysis.
The report further noted that the combined debt of the states amounted to 22.17% of India’s GDP in 2022–23, when the national GDP was ₹2,68,90,473 crore.
It also explained that states’ public debt consists of loans raised from open market through securities, treasury bills, bonds, etc, as well as loans from banks such as the 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).
The CAG report noted that states’ total debt stood between 128% and 191% of their revenue receipts from 2014–15 to 2020–21. When measured against total non-debt receipts for the same period, the ratio ranged from 127% to 190%.
On average, the report said, states’ public debt has been about 150% of their revenue or non-debt receipts. In relation to GSDP, debt levels have generally fallen between 17% and 25%, averaging around 20%. The sharp increase from 21% of GSDP in 2019–20 to 25% in 2020–21 was attributed to the fall in GSDP during the Covid year.
The report further explained that the rise in loans from the Union Government between 2020–21 and 2022–23 was largely due to back-to-back loans in lieu of GST compensation shortfall and special assistance as loans to states for capital expenditure.
The CAG report pointed out that, under the “golden rule of borrowing,” governments are expected to raise loans only for investment or capital creation, not to fund day-to-day expenses. However, it found that 11 states had used borrowed funds to cover their current spending.
The analysis compared capital expenditure with net public debt receipts in 2022–23 and revealed that in Andhra Pradesh, Assam, Bihar, Haryana, Himachal Pradesh, Kerala, Mizoram, Punjab, Rajasthan, Tamil Nadu, and West Bengal, capital spending was lower than the net borrowings.
The report suggested that this indicated part of the debt was being used to meet revenue deficits. It also highlighted that in Andhra Pradesh and Punjab, capital expenditure accounted for just 17% and 26% of net borrowings respectively, while in Haryana and Himachal Pradesh, the figure was around 50%.