Telangana’s fiscal health in green

Hyderabad: It’s official now! Telangana’s repeated contention that it was a pure political play on the part of the BJP government at the Centre in not allowing the State to raise open market borrowings (OMBs) and that it was not based on any fiscal issue has been virtually acknowledged by the country’s Central bank.

By the Reserve Bank of India’s (RBI) own admission in its latest report, Telangana’s fiscal health was beyond reproach with its debt to GSDP ratio at 23.5 per cent in 2019-20 which increased marginally to 24.7 per cent in 2021-22.

The RBI report confirmed that in the financial year 2019-20, around 13 major States had a far higher debt to GSDP ratio than Telangana. Punjab, Rajasthan, Kerala, West Bengal, Bihar, Andhra Pradesh, Jharkhand, Madhya Pradesh, Uttar Pradesh and Haryana, are, in fact, States that have the highest debt burden.

While Punjab has the highest debt to GSDP ratio at 53.3 per cent for 2021-22, Rajasthan has 39.5 per cent, followed by Bihar at 38.6 per cent and Kerala at 37 per cent of debt to GSDP ratio. These 10 States account for around half of the total expenditure by all State governments in the country.

Ironically, all these States were recently allowed to raise their OMBs, but repeated requests by the Telangana government have been ignored. The Centre has been denying giving the nod to Telangana to raise OMBs citing off-budget borrowings and guarantees to various corporations by the State government for the construction of various irrigation projects including the Kaleshwaram Lift Irrigation Scheme and implementation of various welfare measures.

What is interesting is that even if the State continues to secure loans as per Fiscal Responsibility and Budgement Management (FRBM) permissibility, its debt to GSDP ratio, as per the RBI report projections, would be only 29.8 per cent in 2026-27, still lower than most of the other States. In fact, the debt to GSDP ratio of at least 10-11 major States would be much higher than Telangana as per the RBI report. Further, Telangana has one of the lowest interest payment to revenue receipts ratio of 11.3 per cent in the country.

The State had projected borrowings and other liabilities of around Rs 52,167 crore during the current financial year. Accordingly, it had planned to raise Rs 15,000 crore through OMBs in the first quarter (April-June) of the ongoing financial year. Its efforts, however, did not materialise on account of the delay on the part of the Centre in giving its nod. Though the RBI recently gave an ad hoc approval to raise Rs 4,000 crore through bonds, this would still fall much short of the State’s target of raising Rs 15,000 crore in the first quarter.