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ICRA Research Report
After the 16.1% YoY contraction in the gross state development loan issuance to Rs 4.7 trillion in nine months-FY22, the Reserve Bank of India has pegged the same at a substantial Rs 3.1 trillion for Q4 FY22.
The latter is 27.6% higher than the Rs 2.4 trillion raised in Q4 FY22 and has exceeded our expectations. The large indicated borrowing may have been led by concerns related to a potential moderation in the states' borrowing limit relative to gross state domestic product in FY23 and the likely discontinuation of the goods and services tax compensation by end-June 2022.
In our view, the actual state development loan issuance in Q4 FY22 could be lower than indicated, in line with the trend seen in recent quarters, and based on our expectation of higher-than-budgeted tax devolution in FY22.
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