Is India’s public finance unsustainable? Or, are the claims exaggerated?

Budget Deficit Sustainability and Revenue Expenditure Linkages in Major South Asian Economies

“…This is explained by the fact that our study covers post reform era where government is having a more cautious approach towards fiscal management. Moreover, the estimate of cointegrating slope parameter indicates a much higher speed of adjustment to the intertemporal budget constraint compared to Goyal, Khundrakpam & Ray (2004). Contrary to Jha and Sharma (2004) who could not find cointegrating relationship between government revenue and expenditure for Nepal (for 1960-1996) and Pakistan( for 1956Pakistan( for -1999, our study utilizing more recent data provides evidence in favor of synchronization between revenue and expenditure for both the countries.…”

Mean Reversion of the Fiscal Conduct in 24 Developing Countries

“…The standard test for stationarity and co‐integration that failed to account for regime shifts that lead to a structural break in the trends of revenue or expenditure or both could give rise to misleading results. Following Quintos (1995), Ahmed and Rogers (1995), Goyal et al. (2004) and Arghyrou and Luintel (2007), we test the stability of the co‐integration relationship between government spending ( G ) and revenue ( R ) and proceed as follows.…”

“…By taking advantage of new developments in the area of non‐stationary panels, Ehrhart and Llorca (2008) found that government spending and revenue are co‐integrated in the six South Mediterranean countries. Similarly, Goyal et al. (2004) found evidence of co‐integration for India's combined finances (central and state governments) by addressing the issue of regime shift and inter‐governmental flows.…”

Debt sustainability of states in India: An assessment

“…Debt sustainability of states in India: An assessment Makin and Rashmi (2012) 1990-1991 Goyal et al (2004) 1951-2000 Debt sustainability of the centre, states and general government After addressing the issue of regime shift, while fiscal stance of the central and state governments at the individual level were found to be unsustainable, it was weakly sustainable for the combined finances of centre and states Dholakia et al (2004Dholakia et al ( ) 1988Dholakia et al ( -1989Dholakia et al ( to 2003Dholakia et al ( -2004 Debt sustainability of states Based on a uniform target of debt to GSDP ratio of 35%, it was observed that there was a debt problem of significant magnitude only in about half of the 25 states covered in the study Buiter and Patel (1992) 1971-1989 Debt sustainability of centre, states and public sector undertakings (PSU) Indian public debt was found unsustainable after discounting by various alternative measures of interest rates as all the discounted debt series turned out to be non-stationary 4 Need for assessment of debt sustainability at the state level…”