Madhya Pradesh Government Secures Rs 5,600 Crore Loan on Eve of Budget Presentation
In a significant financial move, the Madhya Pradesh government has sought a loan of Rs 5,600 crore just one day before presenting the state budget. This decision comes as the state's Economic Survey, tabled by Deputy Chief Minister Jagdish Devda in the assembly on Tuesday, projects a growth rate of 8.04% for the current fiscal year.
State Debt Soars Beyond Annual Budget Size
With this latest borrowing, the total debt burden on Madhya Pradesh has escalated to a staggering Rs 4.90 lakh crore. This figure notably exceeds the state's total budget size of Rs 4.21 lakh crore allocated for the financial year 2025-26, highlighting a precarious fiscal scenario.
Supplementary Budget and Fiscal Reassurances
To manage immediate expenditures, the government rushed a supplementary budget through the assembly. The Economic Survey report aimed to alleviate concerns by emphasizing that the annual debt taken by the state has consistently remained within the limits prescribed by the Reserve Bank of India (RBI). Additionally, the survey highlighted a positive trend in the debt-gross state domestic product (GSDP) ratio, which has decreased to 27.99% in 2023-24 from 39.5% in 2004-05.
Projected Fiscal Metrics and Interest Rates
Despite the reduction, the survey cautioned that the debt-GSDP ratio might rise to 31.30% by 2025-26. On a brighter note, the average interest paid on outstanding loans is expected to decline from 7.28% in March 2024 to 7.11% in March 2025, indicating a potential easing of the debt service burden.
Analysis of Fiscal Health and Revenue Outlook
The survey report conducted a thorough analysis of the state's fiscal condition, attributing controlled fiscal deficits to prudent fiscal policies, except during the Covid-19 pandemic in 2019-20. For 2025-26, data suggests that both state revenue collection and the devolution of Central taxes are set to increase, positioning Madhya Pradesh to maintain a revenue surplus and ensure healthy fiscal management.
Cumulative Debt Figures for 2025-26
The Rs 5,600 crore loan raises the total debt acquired by Madhya Pradesh in the financial year 2025-26 to over Rs 70,000 crore, culminating in an overall debt of Rs 4.90 lakh crore. This development underscores the state's reliance on borrowing to meet its financial obligations amidst growing expenditures.
