Uttarakhand To Raise Rs 1000 Crore Loan From Market, Experts Seek Income-Expense Balance

Experts warned that going forward, this one-way trend of mounting debt without balancing income and expenditure could pose serious challenges to Uttarakhand’s economy.

Dehradun: The Uttarakhand government is reportedly planning to borrow Rs 1000 crore from the open market to meet the planned expenditure and other financial needs of the state. The move has been criticised because of two reasons — one, Uttarakhand has already raised Rs 3400 crore loans this financial year; and second, the state's sources of income haven't witnessed a proportionate growth either.

Experts have warned that this one-way trend of mounting debt without balancing income and expenditure could pose serious challenges to the state’s economy. Often, states resort to borrowing to move the economy forward. However, the same economy would come to a standstill if things go beyond the repaying capacity, cited experts.

In the first month of 2025, the Dhami government in Uttarakhand has sought Rs 1000 crore loan from the open market through the Reserve Bank of India (RBI), as per the rules. This comes at a time when the state has already raised loans amounting to Rs 3400 crore in the current financial year (2024-25). This fresh loan would mean the total debt for the year would climb to Rs 4400 crore.

As per reports, the State Finance Department on January 2, 2025, issued a notice inviting applications from institutions for giving loans through bids. Economic analyst Rajendra Bisht said, "The state will take loan from institutions which are ready to give a loan of Rs 1000 crore at lowest interest rate through the RBI. This loan is set to be repaid over seven years. The state government will repay this loan by 2032, and it will come at an interest rate of around 7%. This interest on the loan will be paid by the state every quarter or 6 months."

The funds are reportedly meant to support state's schemes in key sectors like energy, agriculture, irrigation, and industry. However, Uttarakhand’s existing debt remains a major cause of concern. As of March 31, 2021, the state’s total outstanding debt stood at a whopping Rs 57,114 crore.

What Experts & Govt Officials Said

Additional Chief Secretary, Finance, Anand Varshan said, "21 financial institutions have come forward and shown interest for giving loan to Uttarakhand. Of this, applications of five organisations have been accepted. The state will be raising a loan of Rs 1000 crore soon at an interest of about 7%."

When ETV Bharat asked Vardhan about the need of this loan, he explained, "The state government takes loan as per the requirement. In case receiving funds from the Centre is delayed, then loans can be raised from the open market. Such borrowing is done to ensure that developmental projects remain on track."

Senior journalist Neeraj Kohli highlighted that since its establishment, Uttarakhand has been heavily relying on Central funds. Kohli expressed, "The concern is that the state has failed to increase its financial resources and the expenditure always exceeded the income and this problem still persists. Gradually, total debt has increased to around Rs 60,000 crore. Also, more than 70 percent of the annual budget of the state is being spent on non-planned items. In case, there is budget cut from the Centre, it becomes difficult for the state to even think of a new scheme."

On the other hand, State Finance Secretary Dilip Jawalkar claimed that whatever loan the state has availed so far, it is within the set standards. "The Centre has set a loan limit of about Rs 7400 crore annually for Uttarakhand. The loan taken by the state is within the prescribed limit. The government has taken this decision keeping in mind various welfare schemes," he opined.