CAG Flags Meghalaya’s Escalating Debt, Ranks State Fourth in Debt-to-GSDP Ratio

Last updated Sep 2, 2024 9

Shillong, Meghalaya: Meghalaya has emerged as the fourth most indebted state in India in terms of its Outstanding Liabilities to Gross State Domestic Product (GSDP) ratio, according to a recent audit report by the Comptroller and Auditor General of India (CAG). The report, covering the fiscal year ending March 31, 2023, places Meghalaya third among Northeastern and Himalayan states, highlighting the state’s growing financial vulnerabilities.

The CAG’s findings indicate a concerning rise in the state’s debt, urging Meghalaya’s government to take immediate action to avoid a looming debt crisis. “The increasing liabilities necessitate urgent measures to prevent the state from descending into a debt trap,” the report warns.

Meghalaya’s financial obligations under the Consolidated Fund include market loans, borrowings from financial institutions, and loans from the Government of India (GOI). By the close of FY 2022-23, the state’s public debt had swelled to ₹14,637.12 crore, comprising ₹11,285.50 crore in market loans, ₹1,349.04 crore from financial institutions, and ₹2,002.58 crore in GOI loans and advances.

The report notes a sharp 20.31% year-over-year increase in public debt, up from ₹12,165.98 crore in 2021-22. This surge was mainly driven by a 117.40% hike in GOI loans and a 13.79% rise in market borrowings.

Moreover, the state’s liabilities on the Consolidated Fund expanded by 20.74% over the previous year, spurred by a 13.79% increase in market loans and a staggering 161.90% jump in GOI loans, excluding a back-to-back loan of ₹253.16 crore given in lieu of GST compensation shortfall.

Alarmingly, Meghalaya failed to achieve the 28% debt-to-GSDP ratio target outlined in the Meghalaya Fiscal Responsibility and Budget Management (MFRBM) Act, 2006, for the period between 2018-19 and 2022-23. The state’s inability to meet this benchmark casts doubts on its fiscal sustainability, underscoring the urgent need for financial reforms to manage the ballooning debt.