The CAG’s first decadal report (2013–14 to 2022–23) highlights a sharp rise in States’ public debt, raising concerns over fiscal sustainability and Centre–State financial relations.
Public Debt: Concept
Definition: Borrowings incurred when government expenditure exceeds revenue.
Classification:
- Internal Debt → Marketable (G-Secs, T-Bills) & Non-marketable (special securities, treasury bills).
- External Debt → Loans from multilateral/bilateral institutions (for Union; States mainly rely on internal borrowing).
Funds: Raised through the Consolidated Fund of India / State.
Debt-to-GSDP Ratio
- Meaning: Measures the state’s ability to repay debt relative to its economic output.
- Significance: Higher ratio = greater fiscal risk; lower ratio = stability.
- Acceptable Norm (FRBM–NK Singh Committee):
- Centre: 40% of GDP
- States: 20% of GSDP
- Combined: 60% of GDP
Key Findings of CAG (2013–14 → 2022–23)
Rising Debt Levels:
- States’ debt rose from ₹17.57 lakh crore → ₹59.60 lakh crore (3.39x increase).
- Debt-to-GSDP ratio: ↑ from 16.66% → 22.96%.
- States’ debt share: 22.17% of national GDP (2022–23).
Inter-State Variations:
- High Debt-to-GSDP: Punjab (40.35%), Nagaland (37.15%), West Bengal (33.70%).
- Low Debt-to-GSDP: Odisha (8.45%), Maharashtra (14.64%), Gujarat (16.37%).
Distribution:
- 8 States >30% of GSDP
- 6 States <20%
- 14 States between 20–30%
Sources of Debt:
- Market borrowings (bonds, securities, T-Bills)
- Loans from banks (SBI), RBI (Ways & Means Advances)
- Financial institutions (LIC, NABARD)
- Union government transfers (e.g., GST compensation loans during COVID-19).