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Debt-ridden T’gana needs elbow room  

The Centre’s decision may be a step in the right direction but screwing on the cap too tightly gives rise to suspicion over whether it has any political axe to grind.

Published: 21st May 2022 07:02 AM  |   Last Updated: 21st May 2022 07:02 AM   |  A+A-

Debt, Loan

Representational Image (Express Illustration)

Telangana is crying foul over the new diktat that it cannot go in for market borrowings this year. The squeeze from the Centre came at a time when the state was hoping to raise Rs 53,000 crore this fiscal through this route. The new regulation would badly hurt the state’s financial planning with elections just one-and-a-half years away.

The Telangana government has taken strong objection to the Centre’s attempts to show that the state was exceeding its limit, by bringing off-budget loans under the Fiscal Responsibility and Budget Management (FRBM) ceiling. The state experienced the first body-blow when the RBI denied permission to auction its securities to raise Rs 2,000 crore recently. Adding insult to injury, the Power Finance Corporation Ltd (PFC) and Rural Electrification Corporation Ltd (REC) have told the state bluntly that they have kept on hold the release of balance loan amounts, which add up to Rs 23,729 crore unless the RBI gives its clearance.

Now, the age-old debate rages once again over whether it is prudent for one to bite more than they can chew. The state’s cumulative public debt is expected to be a whopping Rs 3.23 lakh crore at the end of this fiscal, which includes market borrowings, loans from autonomous bodies and special securities. This accounts for 25% of the state’s GSDP.

The Centre’s decision may be a step in the right direction but screwing on the cap too tightly gives rise to suspicion over whether it has any political axe to grind. Though loans are essential for the creation of assets, more often than not, states tend to use the money to indulge in profligate spending and funding populist schemes, as is the case in Telangana. The state too should realise that debt servicing by raising more debts is bad economic management and may lead to recession. While Telangana should learn to cut the coat according to the cloth, the Centre also should allow some elbow room for the state to prevent it from suffocating.



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