The debt is not bad. Many firms raise large chunks of it in their growth and expansion phases. Some ease out of it with time whereas others struggle. But while the stakeholders, financial markets, banks, and shareholders – can technically put pressure on the firm to course correct, it’s not the same or as simple with the States of India. The debt burden is impacting the image of the government and development works.
According to the RBI, Andhra Pradesh state has crossed the loan and financial deficit that was determined by the 15th finance commission for the 2021-21 financial year. The state government took the loans right, left and centre. The State has given 9 percent bank guarantees in GSDP, which is the highest as no other State gave, for off-budget loans.
In a bulletin released on Thursday, the RBI stated that Andhra Pradesh- AP is on the top 10 debt ridden States. Andhra Pradesh borrowed Rs 4,000 cr loan from open market. Telangana did not take any as the Centre did not permit the State to take the loans from the open market. Hence, the Telangana government relied on borrowings.
Meanwhile, AP government has used a special drawing facility and borrowing along with Rs 4,000 cr loan.