RBI’s report on Telangana’s debt-to-GDP ratio is a shot in FinMin Harish Rao’s arm – The New Indian Express
Express press service
HYDERABAD: State Finance Minister T Harish Rao, who will soon present the 2022-23 budget, has received a “booster shot” in the form of a positive report from the Reserve Bank of India (RBI) on Telangana’s budget performance and market development.
According to a research paper released by the RBI on Friday, Telangana’s debt-to-GDP ratio is the lowest in the country. The study, which was based on annual data for the period between 2014-15 and 2018-19, indicates that the State Performance Composite Index (SPCI) – which measures both fiscal performance and government development United States market – Telangana, has also improved.
With the results of the study, it can be concluded that Telangana’s finances are healthy. Telangana, which manages its debts very well, is better placed than several other large states to gain the confidence of investors.
The average debt to state gross domestic product (GSDP) of Telangana from 2014-15 to 2018-19 was 16.1%, which is the lowest among the states in the country. “The state’s position shows that the debt-to-GDP ratio, on average, ranged from a low of 16.1% for Telangana to a high of 48.7% for Jammu and Kashmir,” a document said. work of the RBI. The low debt-to-GDP ratio indicates the fiscal health of the state.
The RBI working paper “States’ Fiscal Performance and Yield Spreads on Market Borrowings in India”, stated that the weighted average yield spreads of State Development Loans (SDLs) over central government securities in 2018-19 are below 40 basis points for Telangana, which was again the lowest in the country in 2018-2019. This means that the cost of borrowing for TS is low.
Telangana also scores well in the quality of Indian state spending as state capital spending is good apart from committed spending. Investors might have a low preference for states with high outlays and might demand higher yield spreads.
Telangana was able to maintain investor confidence, while raising SDLs. “It may be worth mentioning that state governments used to initially issue bonds up to 10 years. However, with the development of the SDL market and a more active approach taken by states to manage profiles maturity of their debt, some state governments have started issuing securities with longer tenors since 2015-16.
The percentage of the state’s own revenue generation in total revenue revenue is also good, according to the document. Telangana also improved the composite state performance index. “States like Karnataka and Gujarat have relatively higher SPCI throughout the sampling period, while states like Haryana and Telangana significantly improved their SPCI during the period from 2014-15 to 2018-19,” the document reads.
During the study period from 2014-2015 to 2018-2019, Telangana ranked ninth in raising loans in the market. Tamil Nadu, Uttar Pradesh, Maharashtra, West Bengal, Karnataka, Andhra Pradesh, Gujarat and Rajasthan occupied the top eight spots respectively and raised more loans than Telangana, the newspaper noted.
The study has two major objectives: first, to enable states to understand their relative fiscal performance based on the indices and work towards improvement. Second, based on the index, the investor can make more informed decisions about their investment in SDLs, the report says.