The report noted that after accounting for redemptions of Rs 4.2 trillion in FY2027, the net State Government Securities (SGS) issuance is estimated to be in the range of Rs 9.2-9.7 trillion (1 trillion = 1 lakh crore). This reflects a year-on-year growth of 1 to 8 per cent compared to Rs 9.0 trillion in FY2026″.
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It stated, “ICRA forecasts the gross SGS issuance in FY2027 in a range of Rs. 13.4-14.0 trillion (5-9 per cent YoY growth), up from Rs. 12.8 trillion in FY2026”.
The Reserve Bank of India has already outlined borrowing plans for the first quarter of FY2027. The central bank has pegged the gross SGS issuance at Rs 2.5 trillion for Q1 FY2027, which is 26.7 per cent higher on a year-on-year basis.
A key feature of the borrowing strategy this year is the Benchmark Issuance Strategy (BIS), introduced by the RBI on a pilot basis. Under this framework, nine states will collectively borrow Rs 1.5 trillion by issuing securities in standardised maturity buckets.
The aim of this approach is to develop a more structured SGS yield curve over time, which will help improve liquidity and transparency in state government borrowings.However, the report pointed out that for the BIS to be effective, actual issuance by the participating states must align closely with the indicated borrowing amounts in the benchmark maturity buckets.
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In recent years, there has been a noticeable gap between the indicated and actual SGS issuance in the first quarter, which has limited the effectiveness of such strategies.
The report suggested that this gap could be reduced if states submit required information more quickly to the Government of India for determining their borrowing limits. Faster vetting, approval and communication of borrowing limits by the Centre could also help streamline the process.