Is India’s Public Debt Sustainable?

Abstract

The article assesses the sustainability of public debt in India based on historical time series data on non-monetized liabilities/gross domestic product (GDP), revenue/GDP and expenditure/GDP of the combined central and state governments. The assessment based on unit root analysis of non-monetized liabilities/GDP, and co-integration analysis of expenditure/GDP and revenue/GDP shows the sustainability of public debt, mainly on account of accelerating GDP growth, lower cost of government borrowing, favourable currency composition and longer maturity profile of debt. JEL Classification: H62, H63, C22, C32, C51