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Incentivising fiscal prudence for states

Debt is projected to increase by the largest amount in the same states that are currently the most heavily indebted

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Illustration: AJAY MOHANTY

Barry EichengreenPoonam Gupta
At 28 per cent of gross domestic product (GDP), states account for nearly a third of the total debt of Indian governments. (The central government accounts for the rest.) In coming years, the share of the states will almost certainly increase still further. The question is, by how much and — if the answer is “too much”, what can be done about it.
 
In fact, one can imagine different scenarios for the future evolution of the public debt of the central and state governments. As our baseline scenario, we assume that for the next five years, the GDP growth,
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First Published: Jul 30 2023 | 10:13 PM IST

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