• Notification Date: 14-02-2025
• Notification No: N/A

Governments Called to Stop Growing Debt Crisis through Budget Reforms and Regulation

A recent report reminds us that only four states—Gujarat, Odisha, West Bengal, and Maharashtra have managed to lower the debt-to-GSDP ratio. But other states such as Punjab and Tamil Nadu are going to cross a 50% debt-to-GSDP mark by 2027-28, which is casting a doubt on their own fiscal health. India already boasts the highest subnational debt among the BRICS nations, with states accounting for a third of the nation's total public debt.

The report, co-authored by NCAER economist Barry Eichengreen and director Poonam Gupta, urges the government to act at once to tackle the rising debt. It proposes altering the Finance Commission's mandate to suggest tighter fiscal prudence, and even offloading part of the state debt onto the centre. The report also urges states to increase revenue mobilization, like widening the tax base and increasing property taxes, and spending on infrastructure.

To promote more financial prudence, the report recommends having independent fiscal councils in state governments, conducting forensic audits to trace inefficiencies, and exercising better debt management technique. Union government, Reserve Bank of India (RBI), and Finance Commission are also asked to cooperate and implement these reforms in such a way that India's economic stability is guaranteed.