India

State Debt Maturities Lengthen as Borrowings Rise

By Dhirendra Kumar

State governments are extending the average maturity of their outstanding securities, easing near‑term refinancing pressure. According to finance ministry data reviewed by Mint, the weighted average maturity (WAM) of state government securities rose to 8.85 years at the end of March 2025 from 8.50 years a year earlier. Outstanding market borrowings increased 14 % to ₹62.97 trillion from ₹55.20 trillion a year earlier. The longer WAM means states are taking longer, on average, to repay their market borrowings, which affects how often they must refinance maturing securities.

The shift varies across states. Telangana had the longest WAM at 14.33 years, followed by Jammu and Kashmir at 12.38 years and Kerala at 11.96 years. Tamil Nadu stood at 11.33 years and Andhra Pradesh at 10.24 years. Gujarat had the shortest WAM at 4.50 years, with Uttarakhand, Chhattisgarh and Tripura close behind at 4.58, 4.71 and 4.78 years respectively. States with shorter maturities face more frequent refinancing needs, while those with longer maturities spread repayment obligations over a wider period.

The share of securities with more than 10 years remaining until maturity increased to 33.7 % at the end of March 2025 from 14.8 % in March 2021, overtaking the 6‑10 year segment, which fell to 32.9 % from 49.3 %. Securities with 1‑5 years remaining accounted for 27.6 % of the outstanding stock, and those maturing within a year made up 5.8 %.

Experts say the longer maturities reflect states’ growing preference for longer‑tenor issuances since 2015‑16, which helps ease medium‑term redemption pressures. Ranen Banerjee of PwC India noted that fiscal stress has led to higher borrowings and a larger share of recently purchased securities, raising the WAM. He added that states, in coordination with the RBI, have been issuing longer‑tenor securities, extending maturities by 10‑20 years with only modest premiums.

Abhash Kumar of Delhi University explained that a longer maturity profile gives states greater flexibility in managing annual finances, but it does not reduce the overall debt burden. He cautioned that states must maintain fiscal discipline and ensure revenue growth keeps pace with liabilities to avoid debt servicing crowding out development spending.

The weighted average yield on primary issuances of state government securities fell to 7.20 % in 2024‑25 from 7.52 % in 2023‑24, indicating a moderation in borrowing costs. The debt‑to‑GDP ratio of states and Union territories rose slightly to 29.5 % at the end of March 2025 from 29.2 % a year earlier. Public debt accounted for 82.4 % of total liabilities, while market loans made up 67.1 % of total liabilities, up from 65.2 %. No response was received from the finance ministry spokesperson to queries sent before press time.