Tamil Nadu, India’s second largest state by output, is favoring a debt recast to ease its financial burden at a time when the pandemic is forcing states to borrow even more to fund widening budget deficits. The maturity profile of states’ debt suggests that redemption pressure is likely to double from 2026 onwards, the Reserve Bank of India said in its annual review of state finances.


  1. It implies borrowings by provinces might soar in the coming years and could lead to crowding out of the private sector in a market already cramped by issuances by the federal government and state-run enterprises.
  2. The states’ inflated debt sale schedule alludes to that possibility. They are scheduled to borrow as much as Rs 1.78 trillion ($25 billion) from the market in the April-June quarter, higher than the 1.27 trillion rupees indicated in the year-ago period.
  3. Outstanding debt, mainly made up of market borrowings, was expected to have reached 75 per cent of gross domestic product by end-March 2021. It was 72 per cent in end March 2016, according to the RBI.
  4. Tamil Nadu, which is India’s second most industrialsed state and accounts for about 9 per cent of the national output, will table a new budget focusing on demand revival in the coming months.