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Who lends to the Indian state?

Author

Listed:
  • Aneesha Chitgupi

    (xKDR Forum)

  • Ajay Shah

    (xKDR Forum)

  • Manish K. Singh

    (Indian Institute of Technology, Roorkee)

  • Susan Thomas

    (xKDR Forum)

  • Harsh Vardhan

    (xKDR Forum)

Abstract

Much of Indian public finance research has focused on the level of debt and deficits. In this paper, we examine the structure of lenders to the Indian state. To what extent is this lending coerced? Is the present debt management strategy consistent with the objectives of low cost borrowing for the government in the long run, while preserving efficiency in the economy, and retaining the optionality of surging borrowing when faced with rare events? We find 5% of the lending to the Indian state comes from voluntary sources. While financial repression for banks eased `de jure' with a decline in the SLR from 33% in 1988 to 18% in 2021, lending to the state beyond regulatory requirements was Rs.30 trillion in 2021. Alongside this, the growth of the pension and insurance industries created new pools of assets where financial repression generated bountiful lending to the government. These facts help re-examine debt management strategy in India.

Suggested Citation

  • Aneesha Chitgupi & Ajay Shah & Manish K. Singh & Susan Thomas & Harsh Vardhan, 2024. "Who lends to the Indian state?," Working Papers 34, xKDR.
    • Handle: RePEc:anf:wpaper:34
    as

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    References listed on IDEAS

    as
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    More about this item

    JEL classification:

    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
    • H68 - Public Economics - - National Budget, Deficit, and Debt - - - Forecasts of Budgets, Deficits, and Debt
    • H74 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Borrowing
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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