After postponing borrowings in the first two quarters, the State Government has raised two state development loans (SDLs) of ₹1,000 crore each through market borrowings in the third quarter of this financial year.

The government raised both these loans on October 5. These market borrowings, known as SDLs, were raised through the Reserve Bank of India (RBI). While the rate of interest on one loan (₹1,000 crore) is 6.88% and another one is 6.93% and they were borrowed for 10 years and 11 years, respectively.

While Karnataka raised these loans in July last year, this year it raised loans in October, which indicated improved financial position of the State in 2021–22. The State’s revenue collections through GST, sales tax, and excise have recorded improvement this year when compared with 2020–21.

Despite economic recovery, market borrowings were inevitable since the government had to fulfil many commitments on payments of salaries, pensions, implementation of development projects, and other heads of accounts.

On October 5, a total of 17 States, including Karnataka, Tamil Nadu, Kerala, Uttar Pradesh, West Bengal, Rajasthan, Gujarat, Punjab, and Andhra Pradesh, which were impacted by COVID-19 lockdowns in different phases, borrowed ₹22,809.022 crore, the RBI said.

Revenue shortfall

Karnataka was expected to have a revenue shortfall owing to non-levying of fresh taxes in the 2021–22 Budget and disruptions in economic activity due to the pandemic in the first quarter of this fiscal year. In March 2021, the State had proposed to borrow over ₹70,000 crore (4% of the GSDP) during the current financial year.