States Ramp Up Borrowing by 26% for Debt, Welfare

States are set to boost their market borrowings significantly in the October-December quarter, with gross issuance projected to reach ₹3.6 trillion, marking a 25.9% year-on-year increase. This rise is primarily to manage maturing debts and fund welfare and revenue expenditures.

As many as 26 states and Union Territories have adopted the Reserve Bank of India's Benchmark Issuance Strategy. This framework, implemented from Q1 FY27, aims to standardize state bond issuance by adhering to specified maturity buckets, enhancing predictability for market participants.

The increased borrowing is concentrated among major states, with Maharashtra, West Bengal, and Haryana collectively accounting for nearly 70% of the incremental gross borrowing planned for the quarter. Meanwhile, the central government has revised its borrowing plan downwards for the latter half of FY27.

By the end of December, states aim to raise ₹1.4 trillion, reflecting a concentration of borrowing activities towards the quarter's end. For the full fiscal year, gross state government securities issuance is estimated to be between ₹13.4-14.0 trillion.