Buoyed by strong GST collections, states’ borrowing drops
In an unusual scenario, state governments’ fundraising has sharply declined in the second half of the financial year. Bond market players attribute this to robust tax and goods and services tax (GST) collections, along with strong fiscal growth in the states. As a result, there has been a lower supply of bonds from the states.
As a result, the spread between state government securities and government bonds narrowed to 20 basis points for short-term securities, from earlier, 30-35 bps. While the gap between the 10-year state government bond and the 10-year government bond fell to 23 bps from 37 bps. Usually, in the second half of the financial year, states borrow higher than the borrowing amount given in the indicative calendar. From April to September, states raised `3.7 lakh crore.
In October, states raised `84,842 crore against `1,12,037 crore as per the October-December indicative calendar. Additionally, in November so far, the borrowings by states have remained tepid. In the first two weeks of the current month, states borrowed just `14,867 crore against `33,680 crore as per the indicative calendar.
In earlier years, the borrowing overshoot the indicative calendar. In October 2023, states borrowed `92,283 crore, higher than `74,842 crore as per the indicative calendar, while in November 2023, states borrowed `38,250 crore, higher than `25,100 crore. Similarly, In October 2022, states’ borrowings were almost at par with figures given in the indicative calendar.
