The state of states

Acouple of states may be guilty of fiscal imprudence. But why tar all of them with the same brush?

- RAISINA HILL

Concerns have been expressed over some states seeking recourse to excessive borrowing, which no doubt is fiscally imprudent and irresponsible. But how serious are these concerns? And are some states indeed borrowing excessively and living beyond their means?

Data on the debt position of states will tell you a slightly different story. According to a study by the National Institute of Public Finance and Policy, aggregate public debt of 18 major states did go up from 20.53 per cent of gross state domestic product (GSDP) in 2019-20, a pre-Covid year, to 23.5 per cent of GSDP in 2020-21. However, growth in these states' public debt has slowed down since then. In the revised estimates for 2021-22, the public debt of these states increased marginally to 23.66 per cent of GSDP and is projected at 23.93 per cent in 2022-23.

A close look at the debt position of the individual states is even more revealing. The Fifteenth Finance Commission had indicated a glide path for the states' debt position in its report of October 2020. According to it, the states should stay below a debt level of 31.1 per cent of GSDP in 2020-21; 30.7 per cent in 2021-22; and 313 per cent in 2022-23 By that card debt higher stick, only two states had accumulated than the stipulated level in 2020-21- West Bengal at 32.61 per cent and Punjab at 42.17 per cent of GSDP. For the two following years of 2021-22 and 2022-23, the debt level is set to exceed the stipulated level only for two states - Bihar and Punjab.