- Newborn in Madhya Pradesh bears Rs 55,323 statistical debt from state loans
- State borrowed Rs 2,800 crore in 2026 with loans maturing up to 22 years later
- Nearly 30% of Madhya Pradesh's new borrowing services old debt obligations
A newborn in Madhya Pradesh enters the world without signing a loan document. However, if the state government's debt is divided across its population, the child carries an immediate statistical debt burden of around Rs 55,323. While no bank collector will ever show up at their door, the reality is that by the time that child turns 22, the state could still be paying off the loans it is taking out today.
The state recently moved to raise Rs 2,800 crore from the market through two government securities. Of this, Rs 1,600 crore has been borrowed for eight years, while another Rs 1,200 crore has been raised for 22 years. In other words, part of the debt contracted in 2026 will remain on Madhya Pradesh's books until 2048.
Long-term borrowing by itself is neither unusual nor necessarily alarming. Governments routinely borrow for decades to build roads, dams, irrigation networks and other assets expected to serve the economy for years. What makes Madhya Pradesh's 22-year borrowing more significant, however, is another number buried in the state's finances.
The Comptroller and Auditor General's (CAG) State Finances Audit Report for 2024-25, tabled in the Assembly, says 29.43 per cent of the state's total borrowing during the year went towards servicing past debt liabilities. The average for the preceding 10 years was almost identical at 29.30 per cent. Put simply, for every Rs 100 the Madhya Pradesh government borrows, nearly Rs 30 is absorbed by obligations arising from debt taken earlier.
That is perhaps the most important number in the state's debt story.
Borrowing can create future wealth when it finances a highway, an irrigation project, an industrial corridor or infrastructure capable of generating economic activity for decades. But when a substantial portion of fresh debt is needed to deal with old debt, the amount available for creating new assets inevitably gets squeezed.
The CAG has flagged this risk precisely.
According to the audit report, the use of a significant share of fresh borrowing for servicing previous debt reduces the resources available for capital expenditure. The auditor has also noted that in recent years the state's debt has been growing faster than its economy. The longer-term numbers show how sharply the debt profile has changed. Madhya Pradesh's internal debt stood at around Rs 83,718 crore in 2015-16. By 2024-25, it had risen to about Rs 3.33 lakh crore. Once loans from the Centre, public-account liabilities and other obligations are added, the state's overall liability burden becomes considerably larger.
Finance Department sources say Madhya Pradesh's total outstanding liabilities have now reached around Rs 5.31 lakh crore. The Rs 5 lakh crore mark, in other words, is already behind the state. And the pace of borrowing is also rising.
Madhya Pradesh borrowed around Rs 89,797 crore in 2024-25. In the revised estimates for 2025-26, borrowing climbed to roughly Rs 1.01 lakh crore. The 2026-27 Budget now estimates gross borrowing of about Rs 1.06 lakh crore. But sitting alongside that number in the same Budget is another figure. The state is expected to spend around Rs 34,437 crore on repayment of the principal amount of old debt.
The arithmetic captures the cycle. The government raises fresh debt on one side and simultaneously uses a substantial amount of its resources to repay debt accumulated earlier. Net borrowing during 2026-27 is estimated at around Rs 71,753 crore, while the fiscal deficit is projected at approximately Rs 71,458 crore, or about 3.9 per cent of the state's Gross State Domestic Product.
But principal repayment tells only part of the story. Debt carries another recurring cost, interest. And that line in Madhya Pradesh's Budget is becoming steadily larger. The state spent about Rs 25,888 crore on interest payments in 2024-25. By 2026-27, the annual interest bill is projected to rise to around Rs 33,735 crore. That is an increase of nearly Rs 8,000 crore in just two years.
For 2026-27, Madhya Pradesh expects revenue receipts of around Rs 3.08 lakh crore. Of this, approximately Rs 1.38 lakh crore, or nearly 45 per cent, is expected to be consumed by salaries, pensions and interest payments. Put another way, for every Rs 100 that enters the state treasury as revenue, the destination of nearly Rs 45 is already largely predetermined. That is where the debt debate moves beyond Finance Department balance sheets and begins to affect the money available for schools, hospitals, roads, irrigation, welfare and other government priorities.
The state government, however, presents a different side of the picture. Finance Minister Jagdish Devda has argued that borrowing should not automatically be viewed as a financial burden. According to the government, loans are being raised within prescribed fiscal limits and are being deployed in capital works. Roads, irrigation systems, infrastructure and other public assets require large investments, the government maintains, and borrowing helps create infrastructure that supports future economic growth. The state has also maintained that loans are not being used to finance routine revenue expenditure. It points out that the Union government itself provides states with 50-year interest-free loans for capital expenditure.
But the CAG's findings place an uncomfortable question beside that defence. If nearly Rs 30 out of every Rs 100 freshly borrowed is already needed to deal with past debt liabilities, how much of the new borrowing is actually left to create new assets? That question is likely to become more important with every passing year.
