Sustainable Debt Policies of Indian State Governments

P. S. Renjith () and K.R. Shanmugam
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P. S. Renjith: Research Scholar, Madras School of Economics

Working Papers from Madras School of Economics,Chennai,India

Abstract: This article empirically tests whether the public debt is sustainable in 20 major Indian States during 2005-06 to 2014-15, using the Bohn framework for panel data and penalized spline techniques. Results of the study indicate that the debt of Indian State governments as a whole is sustainable. However, at the disaggregated level, the public debt is sustainable in only 12 States and in the remaining 8 States, it is unsustainable and they need corrective actions. Incidentally, in these 8 States, the debt growth is lower than the economic growth and the poverty ratio has come down significantly, indicating that they have seemed to use their debt policy to enhance the welfare of their citizens. We hope these results are useful to policy makers, international agencies and other stakeholders to take appropriate steps to sustain the debt of Indian States

Keywords: Primary Balance; Sustainable Debt; Indian States; Bohn Framework (search for similar items in EconPapers)
JEL-codes: E62 H63 H72 H74 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2018-04
New Economics Papers: this item is included in nep-mac
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Citations: View citations in EconPapers (4)

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Journal Article: Sustainable Debt Policies of Indian State Governments (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:mad:wpaper:2018-171

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