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India to become 50% non-cash economy in consumption in 3 years: Report


Market borrowings by India's state governments are likely to be lower than the amounts indicated in their budgets, as off-balance sheet liabilities will continue to be adjusted in this fiscal year, two sources familiar with the matter said.

Since last fiscal year the federal government has been adjusting for liabilities that are not directly on the balance sheets of states but would eventually have to be serviced by the states.

The off-balance sheet borrowings incurred after fiscal year 2021 will continue to be adjusted over the next three financial years, said one of the sources. However, from here on, any new off-balance sheet borrowings will be adjusted in the same year or the year after they have been incurred, the source added.

The sources spoke on condition of anonymity since they are not allowed to speak to the media.

In one year, the adjustment from borrowing requirements will not be more that 0.25% of gross state domestic product, said a the second source.

Not all states will be equally impacted.

Telangana, Andhra Pradesh, Uttar Pradesh and Kerala are among the list of states with high off-balance sheet borrowings for whom the adjustments will be spread across two to three years, said the second source.

In May 2022, rating agency CRISIL estimated that states' off-balance sheet borrowings hit a decadal high of close to 7.9 trillion rupees ($97 billion) in 2021-2022 or 4.5% of gross state domestic product.

Meanwhile, another 185 billion rupees of such liabilities were accumulated in the last fiscal year ended March, government data disclosed in parliament, showed.

Lower market borrowing by state governments was one factor that helped keep federal government bond yields in check in 2022-2023.

State governments are likely to borrow a gross of 9.5 trillion rupees and a net of 6.7 trillion rupees this fiscal year, according to estimates from rating agency ICRA.

In the last fiscal year, states borrowed a gross of 7.6 trillion rupees, which was 2.3 trillion lower than the amount indicated in the quarterly borrowing calendars issued by states.

Other factors that helped bring down borrowings included a strong rise in tax collections and the availability of capex-loans from the federal government. State governments also had high cash balances at the start of the previous year, which helped bring down borrowings, said ICRA. ($1 = 81.7030 Indian rupees). dt. 09.05.2023

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