States are taking more loans by breaking the scope of their GDP

Free water, free electricity, free ration...the list is long. The state governments are becoming hollow while distributing election raviyas. Mortgaging their properties for expenses. In the last two years only, four states Andhra Pradesh, Uttar Pradesh, Punjab and Madhya Pradesh have spent Rs 47,100 crore. The loan has been taken by mortgaging the properties. Union Finance Secretary TV Somanathan has warned the Chief Secretaries of the states. As per the Finance Ministry, 4 states have mortgaged multiple properties with financial institutions till March 2022.

Finance Ministry officials say that states can borrow only 3.5% of their GDP from the market. Its details are given in the budget. But, to provide free facilities, the state governments take more loans. An official of the Finance Ministry says that these loans are hidden. States do not show these in their budget. The Finance Ministry is trying to include the amount in the Net Borrowing Limit (NBC) of the states if any state mortgages the property.

Many state governments have mortgaged public places like parks, hospitals, government buildings, lands etc. The Reserve Bank has warned in its report that in the next four years, Punjab will have a debt of 46.8 percent of its GDP, Rajasthan 39.4 percent, Haryana 31 percent and Jharkhand 30.2 percent of its total GDP.

The Reserve Bank and the Finance Ministry have warned all the states. According to the rate at which states are taking loans, in the next 4 years, the debt of states can be more than 30% of their GDP.