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Debt sustainability of states in India: An assessment

Author

Listed:
  • Balbir Kaur

    (Reserve Bank of India)

  • Atri Mukherjee

    (Reserve Bank of India)

  • Anand Prakash Ekka

    (Reserve Bank of India)

Abstract

The debt position of the state governments in India, which deteriorated sharply between 1997–1998 and 2003–2004, has witnessed significant improvement since 2004–2005. Debt sustainability analysis based on empirical estimation of inter-temporal budget constraint and fiscal policy response function in a panel data framework, covering 20 Indian states for the period 1980–1981 to 2015–2016, indicates that the debt position at the state level is sustainable in the long run. The increase in contingent liabilities of states and take-over of large chunk of these liabilities through debt restructuring of State Power Distribution Companies, however, would adversely affect the debt position of states.

Suggested Citation

  • Balbir Kaur & Atri Mukherjee & Anand Prakash Ekka, 2018. "Debt sustainability of states in India: An assessment," Indian Economic Review, Springer, vol. 53(1), pages 93-129, December.
    • Handle: RePEc:spr:inecre:v:53:y:2018:i:1:d:10.1007_s41775-018-0018-y
    DOI: 10.1007/s41775-018-0018-y
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    Cited by:

    1. Das, Piyali & Ghate, Chetan, 2022. "Debt decomposition and the role of inflation: A security level analysis for India," Economic Modelling, Elsevier, vol. 113(C).
    2. Shiv Shankar & Pushpa Trivedi, 2023. "Assessing India’s fiscal sustainability considering debt–deficit and financing dynamics," Indian Economic Review, Springer, vol. 58(1), pages 41-70, June.
    3. Piyali Das & Chetan Ghate, 2020. "Public Debt in India: A Security Level Analysis," Discussion Papers 20-08, Indian Statistical Institute, Delhi.
    4. Akram, Vaseem & Rath, Badri Narayan, 2020. "What do we know about fiscal sustainability across Indian states?," Economic Modelling, Elsevier, vol. 87(C), pages 307-321.
    5. Lawrence Ogbeifun & Olatunji Shobande, 2020. "Debt sustainability and the fiscal reaction function: evidence from MIST countries," Future Business Journal, Springer, vol. 6(1), pages 1-8, December.

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    More about this item

    Keywords

    Gross fiscal deficit; Public debt; State governments;
    All these keywords.

    JEL classification:

    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
    • H70 - Public Economics - - State and Local Government; Intergovernmental Relations - - - General

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