Hyderabad: Telangana has the second lowest debt to GDP (Gross State Domestic Product) ratio of 17 per cent among large States in the country. A study report by the Reserve Bank of India (RBI) titled ‘State Finance-A study of Budgets of 2019-20’ released on Monday said that elongation of maturity structure of debt profile by Telangana State was a preferred strategy to limit roll-over risk in debt structure. Maharashtra has the lowest debt to GSDP ratio in the country at 16.9 per cent..
The RBI’s appreciation for the improved maturity structure of Telangana debt profile comes amidst increasing criticism by the Opposition parties over rising debt of the State government. Despite Chief Minister K Chandrashekhar Rao reiterating that the State government was securing loans that was much less than the permissible limits and was only using these funds to create assets for the State, the Opposition parties continue to be critical alleging that it would increase debt burden on the State and have implications on the State’s economy. In it’s study, the RBI observed that elongation of maturity of portfolio is a preferred strategy to limit rollover risk in debt structure. It found the case of Telangana State to be instructive as the State has been issuing securities with longer tenures since 2016-17, with the longest tenure being 30 years. “Because of the leverage the State has due to its economic growth and fiscal discipline, it could raise funds from other financial institutions. Within the limits of Fiscal Responsibility and Budget Management (FRBM) and following the Centre’s guidelines, the State is raising funds from the financial institutions. The State government has decided to utilise extra budgetary funds for the construction of major irrigation projects,” the Chief Minister told the State Legislative Assembly while presenting the Budget 2019-20 recently. The GSDP of Telangana has almost doubled since the State formation. During 2013-14, the last year under undivided Andhra Pradesh, GSDP in Telangana was at Rs 4.51 lakh crore at current prices. In the year 2018-19, the State’s GSDP stood at Rs 8.65 lakh crore demonstrating the economic robustness of the State over the last five years. Over the last two years preceding the State formation, the average annual growth of Telangana region’s GSDP was 4.2 per cent at constant prices. By 2018-19, the GSDP growth in Telangana State had increased two-and-half times and stood at 10.5 per cent. After the State formation, Telangana witnessed a big change in growth of GSDP, increased contribution to India’s GDP and low inflation compared to all India average. The growth of national GDP was more than Telangana at the time of State formation, but Telangana State’s GSDP (14.84 per cent) is now growing at 3.6 per cent more than all India (11.2 per cent) at current prices. The share of State’s GSDP in all India GDP also increased from 3.08 per cent in 2013-14 to 4.55 per cent in 2018-19 at current prices. The inflation in Telangana was also more than the all India average after the State formation, while the State’s inflation has come down now compared to the national figure. As per the official records, the State’s inflation came down from 10.23 per cent in 2013-14 to 4.21 per cent in 2018-19. During the period, the national inflation was at 9.77 per cent in 2013-14 to 5.63 per cent..