To make the debt sustainable, revenues need to grow at 14 per cent per year, higher than what the last three years have achieved. Though revised estimates for 2018-19 show a higher growth, provisional actuals show a drop. Higher budgeted growth in 2019-20 has been flagged down by near stagnation in the financial year to date. The debt requirement is increasingly being catered to by market borrowings (Chart 6). But the market for state government bonds is too illiquid to be attractive with trade happening only for less than a third of trading days in several states (Chart 7).
As a result, foreign investors have stayed away from state government bonds. This financial year, FPI’s have put money in less than 3 per cent of the available limit to invest (Chart 8).
StatsGuru is a weekly feature. Every Monday, Business Standard guides you through the numbers you need to know to make sense of the headlines; Source: State finances report, RBI; Compiled by BS Research Bureau