Chandigarh, September 17
Haryana is the fourth worst-performing state on the debt servicing front with nearly one-fifth its income spent on repayment of debt. The neighbouring Punjab is worst among all states, a study by Bank of Baroda (BoB) has shown.
While the interest to revenue receipts (debt service ratio) is pegged at 19.5% for the BJP-JJP ruled Haryana, the AAP-ruled Punjab has a shockingly high debt service ratio of 22.2%.
Pressure on revenue accounts
As debt increases, so does the interest outgo, which in turn, puts pressure on the revenue accounts as a larger part of the revenue receipts are used to pay interest, which means that little is left for other purposes. Study
“As debt increases, so does the interest outgo, which in turn puts pressure on the revenue accounts as a larger part of the revenue receipts are used to pay interest, which means that little is left for other purposes,” the study asserted.
Panchkula-based financial analyst AK Sharma is of the opinion that Haryana’s high debt service is definitely a cause for concern. “The high debt service ratio will naturally leave much less revenue with the state government at a time when it had embarked on major development works in the run-up to next’s year’s Assembly elections,” Sharma asserted.
However, Haryana is comfortably placed regarding debt to gross state domestic product (GSDP), which is pegged at 26%. In fact, four states — Manipur, Nagaland, Punjab and Arunachal Pradesh — have a whopping debt to GSDP ratio of over 40%. Punjab tops the list at 47%.
A high debt to GDP ratio indicates that debt and the GDP of those economies are not well balanced and they don’t produce goods and services sufficient to pay back debts without incurring further debt, the study noted.
It said five states — Tamil Nadu, Haryana, Jharkhand, Uttarakhand and MP — have ratios between 25-30 per cent, it said. The balance 15 states have ratios above 30 per cent and would need very strict fiscal monitoring to bring down the debt levels.
According to the study, a major issue that has been irking policy makers is the rising level of state debt. Haryana’s debt liability is likely to go up to Rs 2,85,885 crore (budget estimates) by the end of 2023-24 compared to Rs 2,56,265 crore in 2022-23 (revised estimates).
Meanwhile, a senior government officer claimed that Haryana’s economy was in a much better position as compared to many states. “Haryana is on a high trajectory of growth as all major financial indicators are well within the provisions of the Fiscal Responsibility and Budget Management (FRBM) Act, 2003,” he added.
4th worst performing state
- At 19.5% debt service ratio, Haryana 4th worst performing state
- Punjab worst performer on debt service ratio at 22.2%
- Debt to GSDP ratio of 26% put Haryana at slightly comfortable position
- Punjab has worst GSDP ratio of 47% among all states
- Haryana’s debt likely to go up to Rs 2,85,885 crore (budget estimates) by the end of 2023-24 fiscal year
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