UP's public debt to rise Rs 6.11 trn in FY22, driven by Covid-19 impact

Uttar Pradesh’s public debt will swell more than 8 per cent, from Rs 5.65 trillion in 2020-21 to Rs 6.11 trillion in financial year 2021-22 due to the economic impact of the coronavirus pandemic, India’s most populous state estimates.

Topping the debt is market borrowings of more than Rs 4.18 trillion by the state government and its agencies, according to UP’s annual budget. The debt still conforms to the Fiscal Responsibility and Budget Management (FRBM) Act, which mandates states to tame aggregate debt below 30 per cent of their gross state domestic product (GSDP).

At an estimated Rs 6.11 trillion in financial year 2021-22, the public debt ratio stands at 28.1 per cent vis-à-vis the projected GSDP of Rs 21.72 trillion.

UP and Maharashtra account for the highest levels of government debts in India. The top 10 states make up for more than 70 per cent of absolute debt in the country. The impact of the lockdown has been felt in the states’ finances in terms of higher borrowings coupled with a dip in the revenue kitty.

UP’s public debt reduced from 29.2 per cent in Financial Year 2020-21 to 28.1 per cent of the GSDP, but market borrowings marked to the GSDP increased from 18.8 per cent from Rs 3.64 trillion in 2020-21 to Rs 4.18 trillion in 2021-22.

UP will issue bonds worth Rs 41,000 crore to ensure the financial stability of the state energy distribution companies (discoms) battered by losses.

State pension/provident funds and savings/reserve funds comprise Rs 61,682 crore and Rs 22,826 crore of the estimated public debt.