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2025-07-29 17:24:59
Is India's "Hungry" for Local Government Debt Still Unquenched? Excessive Financing Reveals Fiscal Concerns. ⑴ On the afternoon of July 29th, Beijing time, data from the Reserve Bank of India showed that 12 Indian states raised 277.19 billion rupees through loans, slightly below the target of 300 billion rupees. ⑵ Although not fully meeting the target, the scale of this financing still demonstrates India's strong demand for funds among local governments. ⑶ Bond interest rates vary widely across states. For example, Tamil Nadu's three-year bond has an interest rate of 6.14%, while Himachal Pradesh's is as high as 7.28%. ⑷ Regarding long-term bonds, Odisha's 25-year bond has an interest rate of 7.16%, and Rajasthan's 28-year bond has an interest rate of 7.15%, reflecting that longer maturities often lead to higher risk premiums demanded by investors. ⑸ The implicit yields on various Special Development Loans (SDLs) in several states, including Maharashtra, Tamil Nadu, and Telangana, generally range from 6.8792% to 7.1695%, indicating that local government financing costs are not low. (6) This financing exercise reveals the pressures facing Indian states on fiscal spending and their reliance on external funding. (7) The market should closely monitor the accumulation of these local debts and their potential impact on India's overall fiscal health and economic stability.
