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Managing state debt and ensuring solvency : the Indian experience

Author

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  • Rangarajan , C.
  • Prasad, Abha

Abstract

The paper presents the policymakers’ perspective on the reforms undertaken to manage states’ debt and ensure solvency. While the sustained high growth rates of the Indian economy played a part in alleviating the interest burden on debt and ensuring that the debt does not grow in an explosive trajectory, major reforms were implemented to reverse the fiscal decline, develop fiscal responsibility rules to ensure sustained adjustment, and move toward a market-based financing of state deficits. The serious efforts at fiscal consolidation and institutional reforms have enabled states to set on the path toward fiscal correction. Nonetheless, weak global growth prospects and the risk of a further rise in global commodity and fuel prices could generate the dilemma of needing to compress expenditures for ensuring fiscal sustainability while simultaneously needing counter-cyclical spending to boost growth, and challenge the fiscal adjustment process.

Suggested Citation

  • Rangarajan , C. & Prasad, Abha, 2012. "Managing state debt and ensuring solvency : the Indian experience," Policy Research Working Paper Series 6039, The World Bank.
    • Handle: RePEc:wbk:wbrwps:6039
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    References listed on IDEAS

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    1. Dhritidyuti Bose & Rajeev Jain & Lakshmanan L, 2011. "Determinants of Primary Yield Spreads of States in India: An Econometric Analysis," Working Papers id:4370, eSocialSciences.
    2. James M. Poterba & Kim Rueben, 1999. "State Fiscal Institutions and the U.S. Municipal Bond Market," NBER Chapters, in: Fiscal Institutions and Fiscal Performance, pages 181-208, National Bureau of Economic Research, Inc.
    3. Ianchovichina, Elena & Liu, Lili & Nagarajan, Mohan, 2006. "Subnational fiscal sustainability analysis : what can we learn from Tamil Nadu ?," Policy Research Working Paper Series 3947, The World Bank.
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    Cited by:

    1. Martin Melecky, 2021. "Hidden Debt," World Bank Publications - Books, The World Bank Group, number 35595.
    2. Upinder Sawhney, 2018. "An Analysis of Fiscal Policy in an Emerging Economy: Innovative and Sustainable Fiscal Rules in India," Millennial Asia, , vol. 9(3), pages 295-317, December.

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