Cities that are more credit-worthy than states

The municipal bodies of Nashik and Nagpur; and Surat, Ahmedabad, Vadodra and Rajkot that fall in Maharashtra and Gujarat have better credit ratings than their states. While these six cities fall under investment-grade ‘A’ category, with positive outlook, the two states — Gujarat and Maharashtra — have a much lower credit rating at ‘BBB’ with a positive outlook.

When contacted by The Indian Express, an expert from Crisil pointed out, “If state governments go to the markets to raise funds on their own, not backed by RBI, they will be borrowing at a much higher rate than city municipal bodies.”

“Most ratings in the investment grade are significantly higher than the credit risk profiles of the respective state governments. This means that the ratings of ULBs are not constrained by the state Government ratings,” Crisil's senior director Raman Uberoi said. The credit ratings have been carried out for 16 ULBs by the rating agency Crisil under mandate from the urban development ministry as a part of Jawaharlal Nehru National Urban Renewal Mission. The agency has assigned investment-grade corporate credit ratings to ten out of 16 municipal bodies it rated. The remaining four are Kolkata, Panaji, Dehradun and Nanded. A higher rating would help ULBs access the debt market and to play central role in the development of a municipal bond market in India.