At Rs 93k crore, Karnataka plans India's biggest Q4 loan haul

Bengaluru: Karnataka is likely to borrow Rs 930 billion, or Rs 93,000 crore, from the open market in the final January-March quarter, the highest for any Indian state in this period, according to Reserve Bank of India (RBI) data. 

This means Karnataka will borrow an estimated Rs 31,000 crore per month this quarter to close the financial year. The state has borrowed a “modest” Rs 120 billion, or Rs 12,000 crore, until December, according to credit rating agency ICRA. 

The burden of having to fund the welfare-based ‘guarantee’ schemes, coupled with infrastructure projects, has shot up the state’s borrowings 160% - from Rs 44,549 crore in 2022-23 to Rs 1.16 lakh crore that Chief Minister Siddaramaiah wants to raise this fiscal. 

Money borrowed is used to repay outstanding loans and fund development works. 

As per RBI data, Indian states plan to borrow Rs 4.99 lakh crore in Q4, with Karnataka accounting for nearly 19% of this. 

“It’s misleading to judge a state’s total debt based on one quarter’s information,” former IAS officer L K Atheeq, who headed the finance department, said.

“Karnataka borrows most of its annual debt in the last quarter of the year due to its excellent cash flows in first three quarters. Other states borrow throughout the year and hence, their borrowing is distributed in all quarters,” he explained. 

Of the Rs 1.16 lakh crore that Karnataka plans to borrow in the current fiscal, Rs 1.05 lakh crore will be from the open market and the remaining from multilateral development banks. 

In the first two quarters, Atheeq said action plans get approved and tenders called. Execution of works starts in the third quarter.

“Efforts have been made by the finance department to avoid bunching of expenditure in Q4 with some success. Still, Q4 is the dominant quarter for expenditure,” he said.

Public finance professional Madhusudhan B V Rao, however, is not convinced. 

“It’s understandable if there’s huge borrowing in the first two quarters when inflows wouldn’t have picked up and the government will be under pressure to start capital expenditure,” Rao said.

“To borrow like this in the last quarter means poor planning. It signifies pressure”.