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Debt Sustainability of States in India: An Assessment

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  • Kaur, Balbir
  • Mukherjee, Atri
  • Ekka, Anand Prakash

Abstract

The debt position of the state governments in India, which deteriorated sharply between 1997-98 and 2003-04, has witnessed significant improvement since 2004-05. 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 1980-81 to 2015-16, 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

  • Kaur, Balbir & Mukherjee, Atri & Ekka, Anand Prakash, 2017. "Debt Sustainability of States in India: An Assessment," MPRA Paper 81929, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:81929
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    Cited by:

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    2. Piyali Das & Chetan Ghate, 2020. "Public Debt in India: A Security Level Analysis," Discussion Papers 20-08, Indian Statistical Institute, Delhi.
    3. 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.
    4. Abdhut Deheri & Ajit Nag, 2023. "Assessing the Long-Run Sustainability of Public Debt and Fiscal Deficit in India," Global Journal of Emerging Market Economies, Emerging Markets Forum, vol. 15(3), pages 313-329, September.
    5. 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.
    6. 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:

    • H7 - Public Economics - - State and Local Government; Intergovernmental Relations
    • H74 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Borrowing

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