Estimating an optimal debt/GDP ratio: an empirical investigation for Indian states Online publication date: Wed, 28-Apr-2021
by Varun Chotia
International Journal of Public Sector Performance Management (IJPSPM), Vol. 7, No. 3, 2021
Abstract: The objective of this study is to get an insight into the debt scenario of different states of India and understand the factors governing it, thereby estimating an optimal debt/GDP ratio for each of them. The study begins with estimating the trend for optimal debt and plotting it parallel to the actual debt for each Indian state for the time period from 2002-2003 to 2014-2015. Modified Blanchard (1983) model was employed for estimating optimal debt/GDP ratio. The results display notable difference between optimal debt/GDP ratios and actual debt/GDP ratios for almost all Indian states. In states where debt/GDP ratio is rising constantly, the governments should aim at achieving a balance between anchoring debt sustainability and high growth yield in the long run. For states where actual debt/GDP ratio is below the optimal level, policy focus should be on providing cushion against external financial crisis and market shocks.
Existing subscribers:
Go to Inderscience Online Journals to access the Full Text of this article.
If you are not a subscriber and you just want to read the full contents of this article, buy online access here.Complimentary Subscribers, Editors or Members of the Editorial Board of the International Journal of Public Sector Performance Management (IJPSPM):
Login with your Inderscience username and password:
Want to subscribe?
A subscription gives you complete access to all articles in the current issue, as well as to all articles in the previous three years (where applicable). See our Orders page to subscribe.
If you still need assistance, please email subs@inderscience.com
Our Blog 
Follow us on Twitter 
Visit us on Facebook