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Centre’s debt-to-GDP falls, States’ rises
Why is it in the news ?
- According to the Status Paper on Government Debt for 2017-18, the Centre’s total debt as a percentage of GDP reduced to 46.5% in 2017-18 from 47.5% as of March 31, 2014.
- The total debt of the States, however, has been rising over this period, to 24% in 2017-18, and is estimated to be 24.3% in 2018-19.
More in the news
- In absolute terms, the Centre’s total debt increased from Rs.56,69,429 crore at the end of March 2014 to Rs.82,35,178 crore in 2017-18, representing a 45% increase.
- The total debt of the States increased from Rs.24,71,270 crore to Rs.40,22,090 crore over the same period, an increase of almost 63%.
- The centre is moving in the right direction in terms of meeting the N.K. Singh Committee recommendations on public debt.
- The N.K. Singh-headed FRBM Review Committee report had recommended the ratio to be 40% for the Centre and 20% for the States, respectively, by 2023.
Significance :
- As per the N.K. Singh committee, 60% consolidated Central and State debt limit is consistent with international best practices.
- Also, it is an essential parameter to attract a better rating from the credit ratings agencies.
Trend :
- The total outstanding liabilities as a percentage of GDP stood at 24% as at end-March 2018 and is expected to move upward to 24.3% at end-March 2019.
- Ratings agencies have predicted that the combined fiscal deficit of the States to be 3.2% of GDP in financial year 2020, higher than the prescribed 3%.
- Also it seems unlikely that the States will meet their 20% debt-GDP ratio target by 2023.
- The report, however, says that the States do have some fiscal space to reduce their borrowing in the coming years due to the large cash surpluses they hold.
Source
The Hindu.