Telangana Government’s Shift to Long-Term Borrowing: An In-Depth Analysis
Hyderabad.03.12.2025: The Telangana Government appears to be increasingly relying on long-term market borrowings as a strategy to manage short-term financial pressures. Recent data reveals a significant inclination towards loans with extended repayment periods, raising concerns about the long-term financial implications for the State.
Borrowings with Extended Tenures
In December alone, the Telangana Government raised ₹3,909 crore in three separate instalments, each with repayment tenures spanning 20 to 26 years. While this approach may temporarily alleviate immediate fiscal stress, it comes with the trade-off of a prolonged debt burden. The Reserve Bank of India (RBI), in its report “State Finances: A Study of Budgets of 2024-25,” highlighted that Telangana has the highest percentage (23.5%) of outstanding borrowings with maturities exceeding 20 years among Indian states.
States like Tamil Nadu (19.7%) and Jammu & Kashmir (14.9%) trail behind in this category, reflecting Telangana’s distinct reliance on long-term loans.
Maturity Profiles Across Timeframes
The RBI report also sheds light on Telangana’s diverse debt maturity profile:
- 10 to 20 years: 38% of the total outstanding debt, slightly below Andhra Pradesh’s 41.7%.
- 5 to 10 years: 14% of the total borrowings.
- 1 to 5 years: 20.2% of the total outstanding loans.
These figures underscore a deliberate strategy by the Telangana Government to space out repayments over extended durations.
Concerns Raised by CAG
The Comptroller and Auditor General (CAG) previously raised alarms regarding Telangana’s borrowing patterns. In a report, it noted that nearly 59% of the State’s market borrowings were for durations of 20 to 30 years. While the average interest rate on outstanding public debt has decreased marginally from 8.20% in 2017-18 to 7.89% in 2020-21, the lack of financial impact assessments for such long-term borrowings raises concerns about future fiscal sustainability.
The CAG cautioned that this borrowing strategy could necessitate significant fund mobilization in the coming years to service debts, potentially exerting substantial pressure on State finances.
The Road Ahead
As the Telangana Government continues to navigate its fiscal challenges, its reliance on long-tenure loans brings both opportunities and risks. While the immediate benefits include reduced interest rates and manageable short-term liabilities, the long-term implications could strain the State’s financial resources. To ensure sustainable economic growth, experts recommend comprehensive financial impact studies and strategic planning for debt management.
The Telangana Government’s borrowing trends serve as a reminder of the delicate balance required in fiscal policy to achieve both immediate and long-term economic stability.
