Abstract
Abstract
This chapter explains the economic perspective of the sustainability of combined public debt of centre and state governments in India, and reviews the theoretical and empirical literature on the topic. It also presents public debt trends in India. Using statistical approaches and the threshold regression method, it shows that the current level of debt is unsustainable. Econometric estimates reveal that the debt sustainability threshold for India is 61.6 per cent, and that a higher level of debt can be growth-reducing. The simulation exercises based on debt dynamics suggest that India should grow at 11 per cent or above and the fiscal deficit target should be 2 per cent each for the centre and all states to obtain sustainable debt by 2028–29.
Publisher
Oxford University PressOxford
Reference51 articles.
1. Primary Surpluses and Sustainable Debt Levels in Emerging Market Countries’.;Abiad;IMF Policy Discussion Paper,2005
2. Fiscal Sustainability: The Unpleasant European Case’.;Afonso;FinanzArchiv/ Public Finance Analysis,2005
3. Brics’ Foreign Debt Burden and Its Impact on Core Institutional Basis’;Akhmadeev;Journal of Reviews on Global Economics,2018)
4. Public Debt and Economic Growth in India: A Reassessment’;Bal;Economic Analysis and Policy,2014
5. On the Determination of the Public Debt’.;Barro;Journal of Political Economy,1979