The combined outstanding debt of state governments as at the end of March 2002 is at Rs 589,218 crore (Rs 5, 892 billion) -- amounting to 25.7 per cent of the gross domestic product.

The debt-GDP ratio of states is estimated to further increase to 26.7 per cent by end of March 2003 with outstanding debt expected to go up to Rs 6,83,168 crore (Rs 6,831.68 billion).

According to the Reserve Bank of India, between the end of March 2001 and March 2002, states' debt increased 18.3 per cent.

A high portion of the states' debt related to loans from the central government. In fiscal 2001-02 the net loan from central government amounted to Rs 14,801 crore (Rs 148.01 billion), 13.9 per cent of the total borrowings as against Rs 8,396 crore (9.4 per cent) in 2000-01.

This is likely to increase to 18.2 per cent (Rs 18,736 crore). However the share of loans from the centre  in total debt declined to 40.6 per cent at the end of March 2002 as against 45.1 per cent at end of March 2001.

The share of special securities  issued to National Small Savings Fund increased from 11.8 per cent to 16.1 per cent between March 2001 and March 2002.

However, the share of market borrowings has remained broadly unchanged at around 17 per cent.

States are increasingly relying on borrowing from the financial institutions: the share of loans from FIs has increased from 4.8 per cent in 1999-2000 to 7.7 per cent in 2001-02. Also the share of public account borrowings has declined marginally in recent years.

State governments had raised gross and net market borrowings of Rs 18,707 crore (Rs 187.07 billion) and Rs 17,261 crore (Rs 172.6 billion) respectively during 2001-02 as against the allocation of gross and net market borrowings of Rs 19,030 crore (Rs 190.3 billion) and Rs 17,583 crore (Rs 175.8 billion).

The gross and net market borrowings allocated to states for fiscal 2003 was at Rs 17,276 crore (Rs 172.76 billion) and Rs 15,487 crore (Rs 154.87 billion) respectively.

The states raised 43.3 per cent (Rs 8104 crore) through the traditional tranche method, 35.9 per cent (Rs 6,711 crore) through tap-tranche method, 14.8 per cent (Rs 2,765 crore)  through auctions and 6 per cent (Rs 1127 crore) through tap-individual method.