Raising Above-Forecast Revenues to Help States Reduce Market Borrowing: Report
The chief economist of the Icra rating agency, Aditi Nayar, on Friday forecast a 4.7% drop in the state’s gross development loan issuance (
) at Rs 7.6 lakh crore.
She expects the loan to be only Rs 2 lakh crore in the third quarter and Rs 2.5 lakh crore in the fourth quarter.
Above-budget tax devolution to limit SDL’s gross issuance to 7.6 lakh crore this fiscal year, which is 4.7% below last year’s level, Nayar said and stressed this is due the fact that after the contraction of 12.6% of gross the issuance of development loans by the state to 3.1 lakh crore of Rs in the first half of fiscal year 22, the Reserve Bank set the same amount to Rs 2 lakh crore for the third quarter, which is similar to the level of the third quarter of fiscal 21.
“Taking into account our expectation of a higher than expected central tax devolution in FY22, we expect the net issuance of SDL at Rs 1.7 crore lakh in the fourth quarter of FY22. which will be 15.3% less than Rs 2 lakh crore in the fourth quarter of fiscal 21, “the report says.
For the full year, “we estimate net and gross SDL issuance at Rs.5.5 trillion and 7.6 lakh crore, respectively, which is 15.3% and 4.7% lower than there was. one year, “he added.
The RBI sets the loan in the market of 26 states (other than Odisha and Tripura) and two Union territories at Rs 2 lakh crore, similar to the number in the third quarter of fiscal 21.
Meanwhile, predicting that SDL’s gross issuance will decline by 8.1% in the first three quarters of FY22, she said if the actual issuance of Rs 3 lakh crore in the first half was added to the gross issuance of Rs 2 lakh crore shown for the third quarter, total issuance will contract from 8.1 lakh crore to Rs 5.1 lakh crore in the first three quarters of fiscal year 22 from Rs 5.6 lakh crore during the same period of the previous fiscal year.
Taking into account the estimated repurchases of Rs 1.3 lakh crore during this period, the net issuance will contract by 15.4% to Rs 3.9 lakh crore during this period, against Rs 4.6 lakh crore one year ago.
Central fiscal decentralization is expected to exceed FY22 budget estimates, increasing state cash flows in the fourth quarter.
The agency expects tax devolution to states to exceed the amount included by the Center in the FY22 budget by Rs 60,000 crore – likely to be released in the last two months of the fiscal year.
However, redemptions are expected to increase in the fourth quarter, reducing both annually and sequentially the net issuance to Rs 1.7 lakh crore or 15.3% from Rs 2 lakh crore in the fourth quarter of fiscal year 21) and gross issues at Rs 2.5 lakh crore, i.e. 2.9 percent more than Rs 2.4 lakh crore in the fourth quarter of fiscal year 21 and end the year with a net withdrawal of Rs 5.5 lakh crore and a gross issue of Rs 7.6 lakh crore in fiscal year 22.