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Analysis of Public Debt and Fiscal Sustainability for Haryana

Narayan, Laxmi (2016): Analysis of Public Debt and Fiscal Sustainability for Haryana.

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Sound Management of Public Finance at sub-national level is an important ingredient for sustainability of economic development and for efficiency and effectiveness of government intervention programs. The state government presented White Paper on Haryana state finances in an attempt to capture the trends of financial instabilities and weakness within the State Government. The white paper provided motivation and impetus for a detailed and systematic analysis which culminated in this paper. The paper analysed public finances of Haryana with a view to understand debt sustainability position of the state for the period 1981-82 to 2014-15 using three approaches of debt sustainability i.e. domar-debt sustainability approach, indicator analysis and budget constrain approach. Econometric Framework for Assessing Debt Sustainability for Haryana included stationarity and co-integration analysis. Paper found that though the state finances of Haryana are well managed as broad trends do not indicate major problem of sustainability but constraints started to be visible as debt accumulation is rising alongwith pressure of debt burden. Interest payments as percentage of GSDP and as percentage of revenue expenditure have declined with time but maturity profile of outstanding state government securities indicates that from year 2018-19, interest repayment burden is likely to increase as 22.9 percent of its securities will be maturing during 2018-20 period. Traditional debt sustainability indicators support the view that debt liabilities of the state are sustainable but debt sustainability position of Haryana on debt sustainability indicators vis-à-vis other NSC states for the period 2010-11 to 2014-15 has deteriorated. The state is required to increase its revenue base by following a prudent fiscal strategy by enhancing its own non-tax revenues through user charges and by recovering cost from government services.

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