Rating of state bonds may be needed: Seth

RATING OF STATE development loans (SDLs) by credit rating agencies could be explored to introduce fiscal discipline among the state governments, finance secretary Ajay Seth said on Friday.

- PRASANTA SAHU

Seth suggested exploring the possibility of developing a framework to specifically rate SDLs. "A market-based mechanism to incentivise states for fiscal consolidation can be ensured through rating of the SDLs," he said at Ashoka University's first Annual Growth Conference 2025.

His comments assume significance as some states do not rein in revenue expenditures to the required extent, and invest sub-optimally in productive assets, worsening their debt levels.

The 15th Finance Commission had pointed out that SDLs have not been able to attract investors, specifically foreign portfolio investors, due to lack of financial information on the states.