Record borrowing by Indian states is weighing on the local bond market, pushing up funding costs for companies and the federal government.
Net borrowing by the country’s local governments surged 33% to 2.2 trillion rupees ($25 billion) by Aug. 15, according to Reserve Bank of India data. Kotak Mahindra Bank Ltd. and ICICI Securities Primary Dealership Ltd. both predict state governments will have borrowed 9 trillion rupees by the end of March, as they tend to seek more funding in the second half of the fiscal year.
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