NATIONAL LAW UNIVERSITY, JODHPUR

SUMMER SEMESTER
(AUGUST- DECEMBER 2022)

(Term paper towards fulfillment of Mid-Term project in the subject of Economics)

DEBT TO GDP RATIO: ANALYSIS OF TRENDS IN INDIA

SUBMITTED BY: SUBMITTEDTO:

Naman Badsiwal Dr. Kranti Kapoor
Roll No: 1916 (Faculty of law)
Lakshya Sharma
Roll No: 1904
V Semester | B.A., LL. B (Hons.)
Section: B
 Introduction
The role of government in the economy of any country is highly significant in determiningthe
level of the various macroeconomic variables. It does this by its sought-to-be meaningful
interventions in the economy mainly through the way of expenditures and revenue collections.
In this process, it not always tends to cover what it spends. Very simplistically put, this leads to
the rise of a gap, which it fills by way of borrowings (internal and external). This is the debt
burden borne by the government on which it generally has to incur interest liabilities.
This research paper intends to analyze and elaborate on the rece nt trends, composition and
features of these debts and interest liabilities of the General Government (including Central as
well as State Government liabilities) of India by way of comparing them to the growth rate of the
economy, called the Gross Domestic Product at market prices (GDPMP ). This debt- GDP ratio is
taken to be a good parameter for measuring the solvency of the government.
The first chapter deals with the level and composition of the government debt in India along with
the levels of its various constituents (by measuring them as a percentage of GDP). By so bringing
out the components of this debt, the paper tends to take a direction of majorly focusing on the
major constituents as they tend to determine the level of the variable under which they are placed.
The second chapter then analyses thoroughly the trajectory of the debt-GDP ratio. The
sustainability of the debt level has also been discussed. The third and final chapter focuses on
suggesting the effectiveness of the proposed Goods and Services Tax (GST) to better these trends
meaningfully and with a long-term vision.
The financing of fiscal deficit in India is mostly from domestic sources. Domestic sources
constitute roughly 98 per cent of the deficit financing, and approximately 8 4 per cent of domestic
financing is from market borrowings. For this very reason, the paper tends to focus on the trends
of market borrowings, in the light of which the trends in the debt-GDP ratio will be looked into.
The time period covered by the paper is the post global financial crisis (2008) years.

2
 Table of Contents

Introduction...................................................................................................................... 2

Chapter I: Level and Composition of General Government Debt (as a percentage of GDP)
.......................................................................................................................................... 4

Chapter II: Trajectory and Features of Debt to GDP Ratio .......................................... 10

Chapter III: GST as a Solution ...................................................................................... 18

Conclusion ...................................................................................................................... 21

Bibliography ................................................................................................................... 22

3
 Chapter I: Level and Composition of General
Government Debt (as a percentage of GDP)

General government debt (including Centre and State liabilities) is usually divided into public
debt and other liabilities 1. Below are presented tables, reflecting the debt positions of the Centre
and State (and thus the general government). The various constituents of public debt and other
liabilities have been presented along with their shares (of GDP) from 2008 -09 to 2014-15.

Table 1 2:- Debt Position of the Central Government

(in percentage of GDP)
Actuals Estimates
Components RE BE

2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15

A. Public Debt
39.1 39.9 37.8 40.2 41.0 41.0 40.1
(A1+A2)
A1. Internal Debt
34.5 36.0 34.3 36.6 37.7 38.1 37.4
(a+b)
a. Marketable
28.0 30.4 29.3 32.4 33.6 34.7 34.3
Securities (i+ii)
(i) Dated Securities
25.5 28.3 27.6 29.4 30.6 31.6 31.3

(ii)Treasury Bills 2.5 2.1 1.7 3.0 3.0 3.1 3.0

b.Non-marketable
6.5 5.7 4.9 4.2 4.0 3.4 3.1
securities (i to v)
(i)14 Day Intermediate
1.8 1.5 1.3 1.1 1.2 0.7 0.6

1
MoF, Government Debt Status Paper, (2016) available at
http://finmin.nic.in/reports/govt_debt_status_paper_2016.pdf.
2
MoF (2016), Debt Position of the Central Government, (table) available at
http://finmin.nic.in/reports/govt_debt_status_paper_2016.pdf.
4
 T-Bills
0.9 0.6 0.4 0.2 0.2 0.1 0.1
(ii)Compensation and
other Bonds
0.4 0.4 0.4 0.3 0.3 0.3 0.3
(iii)Securities issued to
Int.Fin.Institutions
3.4 3.2 2.8 2.4 2.2 2.1 2.0
(iv)Securities against
small savings
(v)Special Sec. against 0.0 0.0 0.0 0.2 0.2 0.2 0.1
POLIF
A2. External Debt 4.7 3.8 3.6 3.7 3.3 2.9 2.7
B. Other Liabilities (a
9.7 8.9 7.6 6.8 6.1 6.1 5.9
to d)
(a)National Small
0.2 0.6 0.5 0.7 0.8 1.1 1.3
Savings Fund
(b)State Provident 1.5 1.5 1.4 1.4 1.3 1.2 1.2
Fund
(c)Other Account 5.8 4.9 3.9 3.1 2.6 2.5 2.2

(d)Reserve funds and

2.3 1.8 1.7 1.5 1.4 1.3 1.3
Deposit (i+ii)
(i) Bearing Interest 1.4 1.1 0.9 0.8 0.8 0.8 0.9
(ii) Not Bearing Interest 0.9 0.7 0.7 0.7 0.6 0.5 0.4
C. Total Liabilities
48.9 48.8 45.4 47.0 47.1 47.1 46.0
(A+B)

The element worthy of substantial notice in the given table is the increasing share of internal debt
and within it, marketable securities. The share of loans from the market displays an upward trend
in the case of states’ debt too.

Table 2 3:- Liability Position of State Governments

(in percentage of GDP)

3
MoF (2016), LiabilityPosition of State Governments, (table) available at
http://finmin.nic.in/reports/govt_debt_status_paper_2016.pdf.
5
 Actuals Estimates
RE BE
Components

2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15

A.Public Debt
19.1 18.8 17.2 16.6 16.0 15.8 16.2
(i to vi)
(i)Market Loans 7.1 8.0 7.8 8.4 8.8 9.3 10.2
(ii)Borrowings
7.7 7.0 6.4 5.5 4.9 4.3 3.9
from NSSF
(iii)Loans from the
2.6 2.2 1.9 1.6 1.4 1.3 1.3
Centre
(iv)Loans from
Banks and other
1.4 1.3 1.0 0.9 0.9 0.8 0.8
Financial
Institutions
(v)Power Bonds 0.4 0.3 0.2 0.1 0.1 0.1 0.0
(vi)Ways and
Means Advances 0.0 0.0 0.0 0.0 0.0 0.0 0.0
and others
B.Other
7.0 6.7 6.3 6.0 6.1 5.7 5.5
Liabilities (i to iv)
(i)State Provident
3.2 3.1 2.9 2.9 2.8 2.7 2.6
Funds
(ii)Reserve Funds 1.5 1.5 1.3 1.0 1.3 1.2 1.1
(iii)Deposits and
2.3 2.1 2.0 2.0 2.0 1.8 1.8
Advances
(iv)Contingency
0.1 0.0 0.0 0.0 0.0 0.0 0.0
Fund
C.Total Liabilities
26.1 25.5 23.5 22.6 22.1 21.5 21.8
(A+B)

In the case of both Centre and State governments, this increases in market loans (along with a
simultaneous decrease in other constituents) had implications for the debt to GDP ratio of the

6
general government4, discussed in the next chapter. This reflected a shift in the preferences of the
Centre and State Governments for financing their fiscal deficit.
The risk factor involved in terms of volatility of interest rates, rollover risk 5, and volatility of the
exchange market can be measured by assessing the maturity profile and the investor base of the
government debt.

Maturity Profile of Dated Securities of Central Govt.: -

Given the fact that the share of dated securities issued by the Central Government as a percentage
of its total liabilities increased from 52.1 to 68.0 percent and that during 2014 -15, it was used to
finance 87.2 percent of the fiscal deficit6, the risks associated with therepayment of these can be
assessed by way of the time-period within which these tend to mature.

Figure 1 7:-
35

30

25
Percent (of total outstanding)

20

15 End-March 2014

10 End-March 2015

0
Less than 1 1-5 Years 5-10 Years 10-20 Years 20 Years and
Year above
Maturity Bucket

4
Reserve Bank of India, Threshold Level of Debt and Public Debt Sustainability: The Indian Experience,
(2014) available at https://rbi.org.in/scripts/bs_viewcontent.aspx?Id=2843.
5
Rollover risk is a risk associated with the maturity of debt. If the interest rates spurt, the government would have to
incur higher costs for refinancing the debt and would have to incur higher future interest costs.
6
MoF, supra note 1, at 4.
7
Source: Ministry of Finance, Department of Economic Affairs as cited in Government Debt Status Paper 2016.
7
As can be seen from the above figure, the percentage of securities which tend to mature
within 10-20 years has increased from 25.20 to 28.32% while that of those maturing earlier has
decreased. Short-term debt of the General Government has remained below 10 per cent of total
debt. It has been increasing since 2007-08 but seems to have stabilized now below 9 per cent. At
end-March 2014, it represented 8.9 per cent of total public debt compared with 8.6 per cent at
end-March 2013 8. It points to a good approach of the government as regards the rollover risk
associated with the repayment of the securities.
Investor Base: -

Market borrowings, which show an upward trend both in the case of the Centre and the State
governments, are generally long–term instruments with a fixed interest rate. This upward trend is
consistent with a decline in the share of external debt from 10.8 per cent of General Government
Debt at end-March 2002 to 4.4 per cent at end-March 2015. As per cent of GDP, external debt
declined to 2.9 per cent from 8.5 per cent over the same period. The greater share of internal debt
and the low share of external debt insulate the debt portfolio from volatility in the international
market and from currency risk.
Figure 2 9:-

8
MoF, supra note 1, at 4.
9
MoF (2016), ExternalDebt of the Government, (figure) available at
http://finmin.nic.in/reports/govt_debt_status_paper_2016.pdf.
8
Given the increasing diversification of domestic borrowings by the government that is taking
place in the recent years (especially the increasing shares of insurance and provident funds, both
of which are long-term investors) along with the declining external debt, it can be reasonably said
that the domestic investor base is stable and increasing.
Thus, in terms of the composition and risk features of general government debt, it can be
concluded that the status of the debt is improving so as to be beneficial for the government fiscal
policy strategy (by granting the government greater fiscal space) and the economy as well.

9
 Chapter II: Trajectory and Features of Debt to GDP Ratio

The trends in the central, state and general government debt to GDP ratio have been shown below
in the figure.
Figure 3 10:-

The given figure clearly depicts a declining debt-GDP ratio. Considering this trajectory at a
superficial level, it would reflect a positive state of the economy with either a declining primary
deficit11 or a considerably improving GDP growth rate. However, the substantial fall in the
general government debt to GDP ratio from 70.6 in 2009-10 to 65.6 in 2010-11 can be majorly
attributed to the inflationary trends that were witnessed over the same years 12. After that, it
remained more or less stable, only to pick up in 2014-15 to 66.7 from 66.1 in 2013-14.
This is basically the time frame which the researcher here wishes to delve into. This is done by
way of looking at three factors: -

10
MoF (2016), ExternalDebt of the Government, (figure) available at
http://finmin.nic.in/reports/govt_debt_status_paper_2016.pdf.
11
Primary deficit is one of the parts of fiscal deficit. While fiscal deficit is the difference between total revenue and
expenditure, primary deficit can be arrived by deducting interest payment from fiscal deficit.
12
MoF, supra note 1, at 4.
10
 • Real interest rates
• Primary and Revenue Deficits
• Growth rate of GDP (in nominal and real terms)

Real Interest Rates: -

A glance at the inflationary trends would reveal that the inflation rate suddenly picked up to 9.5%
in 2010 from 2009 levels. In the very recent years however, deflation was witnessed mainly due
to the sharp fall in the international crude oil prices that indirectly contributed to the fall in the
overall price levels.

Figure 4 13:- India: Inflation rate from 2010 to 2016

(Compared to the previous year)
12.
9.5 9.54 9.94
10. 9.44

8.
5.93 5.49
Inflation Rate (in %)

6. 4.91

4.

2.

0.
2010 2011 2012 2013 2014 2015 2016
India: Inflation rate from 2010 to 2020 (compared to the previous year)

Influenced by these trends, the real interest rates tended to be negative in 2010. Gradually picking
up till the year 2013, these rates witnessed a spurt in 2014 and 2015 as is corroborated by the
fact of the lower inflation rates in these years. The trajectory of the real interest rates has been
laid down in the given table below.
Table 3 14:- Real Interest Rate Values in India
Year Value

13
Statista (2016), Inflation Rate in India from 2010 to 2020 (compared to the previous year), (figure) available at
https://www.statista.com/statistics/271322/inflation-rate-in-india/
14
Knoema (2015), Real Interest Rate Values in India, (table) available at
https://knoema.com/atlas/India/topics/Economy/Financial-Sector-Interest-rates/Real-interest-rate.
11
 2015 8.92
2014 6.73
2013 3.83
2012 2.55
2011 4.68
2010 -0.60
2009 5.77

This negative relationship between inflation and real interest rate is proven by the Fisher’s
Equation 15 which is often used to calculate the latter.
Thus, 2010 was the year which witnessed the liquidation effect 16. As a result, a kind of revenue,
called the financial repression revenue, was generated for the government. During 2008-09 to
2012-13, on an average, the ratios of financial repression revenues/GDP (%) and financial
repression revenues/tax revenues were 0.1 and 0.3 respectively 17, these numbers being significant
to contribute to that fall in debt-GDP ratio.
However, in the later years, the real interest rates began picking up much faster as has been shown
in the table above. The rise in the ratio, nonetheless, has not been significant, as could have been
expected given the above figures.
This is where the role of GDP growth rate comes in. The paper will now look at the primary and
revenue deficits in the time period under consideration and then go on to look at the GDPgrowth
rate, analyzing both of their contributions to the rise or decline in the debt-GDP ratio.
A factor that could be counted in as being responsible for the rise in interest burden, and not
interest rates, is the increase in market borrowings. Such an increase only reflects a move

15
Fisher’s equation: r t = (1+i t-1) / (1+π t) -1 (where i = nominal interest rate; r = real interest rate; and π = inflation
rate).
16
The negative real interest rates help to liquidate or erode the real value of government debt. The year, in which the
real interest rate turns negative, is considered as a liquidation year.
17
Reserve Bank of India, Threshold Level of Debt and Public Debt Sustainability: The Indian Experience,
(2014)
12
towards a market-determined interest rate system through auction of government securities.
While the domestic investor base remains robust, the volatility is certainly greater in the interest
rate market thus leading to such an increase.
Primary and Revenue Deficits: -

Primary deficit measures the current year borrowings which arise on account of the difference
between current expenditures and current revenues. The debt-GDP ratio dependson this variable
in a significant manner. Revenue deficit (the difference between revenue expenditures and
revenue receipts) is, in turn, a better indicator of the fiscal stability of the government because of
the nature of the revenue expenditures and revenue receipts. While revenue expenditure (like
expenditure on subsidies, interest payments etc.) is considered to be contributing negligibly to
the growth in the economy because of its inability of purchasing assets, revenue receipts (like
taxes, fees, fines etc.) are considered very significant because they make up the major chunk of
the total receipts and determine the solvency of thegovernment. The trends in the primary deficit
and revenue deficit (it includes interest liabilities) can contribute in the understanding of the
pattern followed by the debt-to GDP ratio.
Figure 5 18:- Trends in Primary and Revenue Deficits (General Government) from 2009-
2010 to 2015-16

80.00

60.00

40.00

20.00

0.00
2009-10 2010-11 2011-12 2012-13 2013-14 2014-15
-20.00

-40.00

-60.00

Percentage change in Gross Primary Deficit Percentage change in Revenue Deficit

18
Source: Reserve Bank of India, Handbook of Statistics on Indian Economy
13
As has been shown in the above figure, the primary and revenue deficits tended to grow by close
to 60% in 2009-10. This was what contributed to the high debt-GDP ratio in those years. A fall
in the primary and revenue deficits in the subsequent years, in combination with the erosion of
the value of interests on securities (as discussed above) led to the substantial decline in the ratio
(to 65.6 in 2010-11).
Continuing from where the researcher left in the previous section, the trends in 2014 -15 can be
understood to an extent from the above figure. The primary deficit tends to rise by about 30% in
this period. The debt-GDP ratio, however, increased by only 0.5% in these years. While increase
in the real value of the interest rates and the primary and revenue deficits contributed to
the increase in the ratio, the interest rate-growth differential19 was what helped in offsetting
their impact to an extent.
What can be observed from the above given figure is that the growth rates of both primary and
revenue deficits are decreasing with the latter decreasing much faster. In three of the given
periods, the primary deficit tended to be negative. This reflects an increasingly sound policy of
cutting down on revenue expenditures and giving way for the increase in capital expenditures.
This is sound because of the fact that the multiplier value for capital expenditure generally tends
to be greater than that of the revenue expenditures 20. This can of course vary under different
circumstances, but the observation as held out in the previous line generally holds well under
most.

Table 4 21:- Expenditure Multipliers without any constraint on fiscal variables

Variable Impact Multipliers

Capital expenditure Multiplier 2.45
Transfer Payments Multiplier 0.98
Other Revenue Expenditure Multiplier 0.99

19
The differential between the interest rate paid to service government debt and the growth rate of the economy is the
interest rate-growth differential.
20
S.Bose and N.R.Bhanumurthy, Fiscal Multipliers for India, [unpublished, at National Institute of Public Finance
and Policy].
21
S.Bose and N.R.Bhanumurthy (2013), Expenditure Multipliers without any constraint on fiscal variables, (table)
available at http://www.nipfp.org.in/media/medialibrary/2013/09/WP_2013_125.pdf
14
Going by the values, an increase in capital expenditure by Rs. 1 crore could lead to an increase
in the GDP by Rs. 2.45 crores (both in nominal terms).
It has been witnessed in the recent years that the government has been increasing the capital
expenditure, while reducing the share of revenue expenditure 22. This could lead to a declinein
the debt-GDP ratio in the future.
Growth Rate of GDP: -

The inflationary trends as have been displayed in Figure 4 above led to a substantial increase in
GDP (in nominal terms) till about 2013-14. Since the debt-GDP ratio includes GDP measured in
nominal terms and not real terms, these trends contributed a lot in first making the ratio to fall in
2010-11 and then more or less stabilizing it. The growth rate of GDP (in nominal and real terms)
has been displayed in the given figure below.
Figure 6 23:-

16
13.9
14 13.3

12 10.8

10

8 7.2 GDP at 2011-12 prices

6.6
5.6 GDP at current prices
6

0
2012-13 2013-14 2014-15

22
MoF, Indian Economic Survey 2015-16 [Vol. II], (2016) available at http://indiabudget.nic.in/es2015- 16/echapter-
vol2.pdf
23
Source: Statistics Times, 2011-12 Series.
15
The trends of 2014-15 can now be fairly understood. The interest rate (in nominal terms) in this
period was around 10.20% which is lower than the nominal growth rate of GDP standing at
10.80%. This differential contributed to offset the impact of a surge in real value of interest rates
while the public debt was growing, thus leading to only a marginal rise in the ratio.
However, a problem lies here. While the increase in the GDP growth rate in real terms displays
an increasing number, it should be noted that this increase is because of the robust domestic
consumption levels. The gross investment levels in the economy have been declining because of
the uncertainties prevailing in the global economic market and low export demand because of
lower commodity prices in the rest of the world 24. The trends in savings and investment levels
have been shown in the given figure.
Figure 7 25:-

The pickup in savings was greater than the pickup in investment in the private corporate sector.
It was mainly the household sector, however, which led to the overall decline in the gross fixed
capital investment levels, given the fact that it contributes around 45% in the domestic incom26.

24
MoF, supra note 22, at 15.
25
MoF (2016), Gap between Saving and Investment, (figure) available at http://indiabudget.nic.in/es2015-
16/echapter-vol2.pdf
26
MoF, supra note 22, at 15.
16
Thus, for the growth to remain robust and for the debt-GDP ratio levels to decline in a meaningful
sense, investment levels need to pick up even though there is not much scope given the prevailing
uncertainties in the global scenario.
Talking about the sustainability of the debt levels, it has been often found out by the various
research papers (through empirical methods) that debt levels up to 61% of the GDP are
sustainable in the Indian scenario. The various methods in which high debt levels could reduce
the growth rate are: reduced investment/capital accumulation following the pressure on long-
term interest rates; reduced (perceived) returns on investment due to uncertainty about future
prospects and policies; and risk of introduction of distortionary taxes27. To effectively bring down
the debt-GDP levels, the introduction of the Goods and Services Tax (GST) is imperative. This
has been discussed in the following chapter.

27
Reserve Bank of India, supra note 17, at 12.
17
 Chapter III: GST as a Solution

While a look at Figure 5 and at the overall expenditure and revenue levels might boost the sense
of optimism, a deeper look at these trends (with a long-term vision) brings light shades of
darkness to that optimism.
Table 5 28:-

Year Gross fiscal deficit Gross primary deficit Revenue deficit

2009-10 6046.68 2900.98 3700.15

2010-11 5340.32 1854.71 2492.00
2011-12
6849.66 2849.63 3703.88
2012-13 6843.95 2300.90 3439.60
2013-14 7497.11 2154.80 3676.11
2014-15
8747.18 2783.95 3808.21

This is the data set for Figure 5. What can be clearly seen from the table is that the primary deficit
of the government increased substantially in 2014-15. Revenue deficit, however, did not increase
significantly pointing to the increase in the tilt towards capital expend iture. This, as has been
discussed above, is a positive indicator for the economy, as it could increase the growth rates
more than what revenue expenditure could. However, given the plummet in international crude
oil prices, lowering of the inflationary rates and substantial increase in the indirect taxes (excise
duties on petroleum), the tax buoyancy 29 should normally tend to increase, but it has been
unusually declining in the case of India. It actually fell to 0.8 in fiscal 2014 despite a one-time
surcharge on high-income earners30. Thus, while the overall tax revenues might show an increase
(as in the figure given below) due to the substantial increase in tax charges, low tax compliance
also crept in along with it.

28
Source: Reserve Bank of India, Handbook of Statistics on Indian Economy.
29
Tax buoyancy is measured as the percentage increase in tax revenues for every 1% increase in GDP.
30
CRISIL, In fiscal correction quest, the best bet’s GST, (2014) available
at http://www.crisil.com/pdf/research/GST-impact-on-fiscal-deficit.pdf.
18
 Figure 8 31:-

The need now is thus for the effective implementation of the Goods and Services Tax (GST). As
the expenditure strategy of the government has more or less taken a reasonable or rather good
path, the reform needs to be in the sphere of revenues and tax buoyancy.
GST could help here in two major ways32:
• It has the potential to remove the cascading effect of the various taxes imposed separately
by the central and the state governments consequently leading to lower filing and other
costs. This could boost investment expenditure, especially by the private corporate sector,
which has been seeing a decline in the recent years. Lower costs would also mean a boost
in the competitiveness of the Indian goods and services at the international level. This is
what is required in the conditions of lower global commodity prices and declining exports
as suggested above.
• The direct benefit of GST would be an increase in the tax revenues because of an increase
in the tax buoyancy and compliance, which would augment the increase in tax revenues
as a result of the growth anticipated, as explained in the previous point. According to a
study of the NCAER, this could lead to an increase in the GDP by about 0.9-1.7 percentage
points. This could thus lead to a great decline in the debt-GDP ratio of the general
government by both a decline in the debt levels of the government because of the increased
revenues as well as because of the increase in the GDP levels, in real terms.

31
MoF (2016), Tax Revenue as Percent of GDP, (figure) available at http://indiabudget.nic.in/es2015- 16/echapter-
vol2.pdf
32
CRISIL, supra note 30, at 18.
19
 Conclusion

The recent trends in the debt incurred by both the Centre and the State governments show an
increasing trend of market borrowings and a declining one of external debt. Such trends mean
that while the investor base of the domestic market is becoming more robust, the volatility of
borrowed funds to exchange rate shocks especially in the prevailing environment of global
uncertainty is decreasing. Also, the weighted average maturity bucket shows a favorable trend
in the sense that the percentage share of the long-term debts is increasing while that of short-
term debts is decreasing. However, in the recent years, the short-term debt as a percentage of
GDP has increased which wouldn’t bother India’s debt sustainability position much.
Considering the overall trends in the debt-GDP ratio of the General Government, it can be seen
to be declining. However, the role of the inflationary trends, real interest rates, interest- rate
growth differential, primary deficit and nominal GDP growth rate can be hardly
overemphasized. The ratio fell steeply by around 5% points in 2010 -11, but has witnessed a
marginal rise by 0.5% in 2014-15.
Taking a glance at the fiscal management strategy of the Central Government, it can be
witnessed that the capital expenditure share is increasing with a simultaneously declining share
of revenue expenditure. This is good for the economy and the debt-GDP ratio as this would
stimulate the growth rates far better. However, the tax buoyancy, even with higher levels of
union excise duties and thus indirect taxes due to the steep fall in global crude oil prices has
tended to decline till fiscal 2014, which is an unusual trend.
The need therefore is of the fast and efficient implementation of the Goods and Services Tax
(GST) as it would stimulate growth rates by increasing private corporate sector investment and
raise the levels of tax compliance, leading to greater tax revenues. This would contribute
substantially to bringing down the debt-GDP levels in a meaningful manner by both making
the debt levels more sustainable and boosting domestic growth rates.

20
 Bibliography

REPORTS

1. Ministry of Finance, Government Debt Status Paper, (2016).

2. Ministry of Finance, Indian Economic Survey 2015-16 [Vol. II], (2016).
3. Reserve Bank of India, Threshold Level of Debt and Public Debt Sustainability: The
Indian Experience, (2014).
4. CRISIL, In fiscal correction quest, the best bet’s GST, (2014).

JOURNALS
1. R.Srivastava, Fiscal Deficits and Government Debt: Implications for Growth and
Stabilisation, 40(27) ECONOMIC AND POLITICAL WEEKLY (July 2, 2005).
2. C.Rangarajan and D.K.Srivastava, Dynamics of Debt Accumulation in India: Impact
of Primary Deficit, Growth and Interest Rate, 38(46) ECONOMIC AND POLITICAL
WEEKLY (November, 2003).

NEWSPAPER ARTICLES
1. S.S.A.Aiyer, Don’t underestimate role of inflation for India’s falling debt-GDP ratio,

THE ECONOMIC TIMES (January 7, 2015).

WORKING PAPERS
1. P.Das, Debt Dynamics, Fiscal Deficit, and Stability in Government Borrowing in India:
A Dynamic Panel Analysis (Working Paper No. 557, Asian Development Bank
Institute, 2016).

WEBSITES
1. www.statista.com
2. www.knoema.com
3. www.statisticstimes.com

4. www.livemint.com
5. www.nber.org
6. www.worldbank.org

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DATABASES ON INDIAN ECONOMY
1. Reserve Bank of India, Handbook of Statistics on Indian Economy

UNPUBLISHED ARTICLES

1. S.Bose and N.R.Bhanumurthy (2013), Expenditure Multipliers without any constraint

on fiscal variables [unpublished, at National Institute of Public Finance and Policy].
2. A.Goyal and B.Sharma (2015), Government Expenditure in India: Composition,
Cyclicality and Multipliers [unpublished, at Indira Gandhi Institute of Development
Research].

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