India's Looming Debt Trap (Genre: Indian Economy)
I NDIA’S TRYST WITH THE TIMES: THE LOOMING DEBT TRAP Since 1978-79, the Centre has been regularly running revenue deficits. The states too have been imitating the Centre from 1987-88. The result is that the combined outstanding liabilities of the Centre and states, net of loans advanced by the Centre to the states, total about 76% of GDP. This suffers in comparison with the figure of 62% for 1990-91, itself a year of financial turbulence for the country. This is a devastatingly horrific state of affairs! A worse picture emerges if one looks at the ratio of total outstanding liabilities to total tax receipts. Between 1990-91 and 2002-3, this ratio deteriorated from 5.5 to 6.4 for the Centre. For the states, it worsened from 3.7 to 4.5. Combined, for the Centre and the states, it slipped from 4 to 5. In other words, if all tax revenues of the Centre and the states were used only to pay back outstanding liabilities, neglecting interest on these liabilities and other c...