Increasing reliance on off-budget borrowings casts a shadow
GS3Economy · S&T · Environment · Security· Fiscal policy, budget & taxation (GST)· Mains·
Why in news
Andhra Pradesh's 2026-27 budget revealed a heavy reliance on off-budget borrowings through state-backed guarantees to fund essential machinery and infrastructure.
Background
As of December 31, 2025, Andhra Pradesh's total guaranteed amount exceeded ₹3.11 lakh crore. The outstanding principal against these guarantees is ₹1,77,033.88 crore, with significant debt tied to the Energy Department and corporations like APSDC and APRDC.
Facts for Prelims
- FactAndhra Pradesh's total guaranteed amount exceeded ₹3.11 lakh crore as of December 31, 2025
- FactOutstanding principal against state-backed guarantees stands at ₹1,77,033.88 crore
- BodyNABARD: Financial institution providing loans to the state
- PlaceAPSDC and APRDC: State corporations involved in debt guarantees
For Mains
Q. Discuss the fiscal implications of off-budget borrowings and state-backed guarantees on the long-term debt sustainability of Indian states.
Dimensions to cover in your answer
- Fiscal opacity: Off-budget liabilities obscuring the true extent of state debt and fiscal deficit
- Crowding out: High state-guaranteed debt potentially limiting future fiscal space for social spending
- Contingent liabilities: Risk of sudden fiscal shocks if state-backed corporations default on guaranteed loans
Keywords: fiscal deficit · contingent liabilities · debt sustainability · off-budget borrowing · fiscal transparency
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