Which metric is more significant in UP: Total debt or debt-to-GSDP ratio?

The outstanding liabilities of UP were Rs 4,73,348.2 crore (Rs 4.73 trillion) as of March 31, 2017. The 2022 Budget Estimates (BE) of the state show that this amount has increased by 38 per cent to Rs 6,53,307.5 crore. 

"If a state is experiencing economic growth, it’s possible that there are social priorities which need funding. This is why we see debt levels going up,” said Suranjali Tandon, assistant professor at the National Institute of Public Finance and Policy.

But, while the absolute value of debt has gone up by around 38 per cent, the proportion of the debt with respect to the state's GSDP decreased from 36.7 per cent on March 31, 2017 to 34.2 per cent (FY22 BE). This means that in the same period the state’s GSDP also increased from around Rs 10 trillion to around Rs 19.10 trillion (BE).

Which metric is more significant: The total debt or the debt-to-GSDP ratio? Dharmakirti Joshi, chief economist at CRISIL, says the debt-to-GSDP ratio is relatively significant because “you always look at debt with respect to the income. GSDP is the state's income and the outstanding liabilities are looked at with respect to the state's debt”.

From 2005 to 2014, the absolute value of UP's debt was increasing at an average rate of Rs 14,441 crore. But from 2015 to 2022, the absolute debt was increasing at an average rate of Rs 48,382.85 crore — which is over 3 times the rate of increase between 2005 and 2014. UP's gross fiscal deficit has grown from Rs 32,513 crore to Rs 53,196 crore (BE) in 2021.

 

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Source: IndiaSpend