The rating agency also has a stable outlook in its rated state-government guaranteed debt programmes and is likely to affirm all other state government guaranteed debt programmes ratings in FY15.
    
"The ratings on the Andhra government guaranteed debt programme have been put on rating watch evolving following bifurcation of the state," an India Ratings report said here on Tuesday.
    
The agency estimates consolidated fiscal deficit of states to increase to 2.3 percent of GDP in FY14 as against the budget estimate of 2.2 percent. However, this would not affect their consolidated credit profile, it added.
    
The study said value added tax on petroleum products could pose a concentration risk for consolidated state finances if crude oil prices decline, though this at present looks difficult. The petroleum sector contributed nearly 30 percent to the VAT collection of states in FY13.
    
The study highlighted that aggregate debt of states as a percentage of GDP is likely to increase to 21.7 percent in FY14 from the budgeted estimate of 21.5 percent.
    
"Despite this slippage, debt will be sustainable as we believe nominal growth of economy in excess of interest rate on debt will continue to support the agency's debt sustainability expectations," it said.
    
The rating agency expects the liquidity of states to remain comfortable in FY15. However, it warned that fiscal profligacy in the run-up to general elections and a prolonged growth slowdown could lead to the outlook being revised to negative, but it saw low probability of both possibilities.

(Agencies)

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