Q2. What are the contributions in "Debt dynamics, fiscal deficit, and stability in government borrowing in india: a dynamic panel analysis" ?
Given that the state governments are endowed with expenditure autonomy, this paper investigates whether the composition of expenditure of the subnational governments has an impact on the degree of indebtedness.
Q3. What are the main factors for the deterioration of the fiscal health of the Indian states?
8interest payments, inadequate recovery of user charges, rising expenditure on wages and salaries, and sluggishness in the central transfer of resources have been the major factors for the deterioration in the fiscal conditions of the Indian states (Reserve Bank of India 2002).
Q4. What is the implication of co-integration between revenue and expenditure?
If fiscal deficit is stationary, as in the case of co-integration between revenue and expenditure, higher interest payments, for example, implies lower spending in other components in the budget so that the co-movement of expenditure with revenues is maintained.
Q5. What is the role of the Finance Commission in the horizontal imbalance?
The transfer through the Finance Commission, although restricted to the non-plan side of the budget, plays an important role in correcting the horizontal imbalance.
Q6. What is the reason for the deterioration of the fiscal health of the state of west?
A large debt ratio and corresponding larger proportion of interest payment is a cause of concern from the point of view of stability and sustainability of fiscal policy of the government of West Bengal.
Q7. What is the main contribution of the present study to the literature?
The major contribution of the present study to the literature consists of analyzing in detail the regional variation of deficit structure and its impact on government borrowing and growth at the subnational level in the context of the fiscal reforms prescribed by the Finance Commission of India.
Q8. What is the effect of the co-integration between the time series of revenues and expenditures?
As long as government expenditure and revenue are stationary in first differences and are co-integrated, the fiscal position will be sustainable (Hakkio and Rush 1991).
Q9. Why did West Bengal experience a deficit in primary balance?
West Bengal’s poor performance (along with some other states) on revenue balance is due to the lack of revenue receipts to meet expenditure, including interest payments on past debt.
Q10. What is the effect of a growing debt ratio on the economic growth of the states?
In the empirical results expounded in this study, a growing debt ratio implies the inefficiency in fiscal management of the government in a sense that government spending on capital fails to contribute to the economic growth significantly.
Q11. What is the effect of government borrowing on the growth of the economy?
On the other hand, if government borrowing was used for capital formation, then growth potential of the economy would increase and the higher growth will ultimately reduce the share of public debt in GDP.
Q12. How much of the revenue receipt was spent on interest?
Average interest payments during 2000–2013 were the highest (over 37% of the revenue receipt) for West Bengal followed by Punjab exhibiting nearly one-fourth of its revenue receipt as interest for public borrowing during the same period.
Q13. What is the main reason for the deterioration in state finances?
The revenue deficits at the subnational level in India have persisted since the late 1980s, and the progressive deterioration in state finances started since the late 1990s.
Q14. What is the reason for the higher level of borrowing at the subnational level?
The authors observe that the increase in revenue expenditure has been mostly responsible for the higher level of borrowing at the subnational level in India.
Q15. What is the reason for the deterioration of the financial health of the state governments?
A sharp deterioration of financial health of the state governments during the past few decades has not only been because of state specific reasons, but also owing to the ever growing vertical imbalance (Report of the Tenth Finance Commission [GOI 1994]).
Q16. What are the main reasons for the deterioration of the fiscal health of the Indian states?
While the states’ own revenue sources are not increasing fast enough to match their rising expenditure, central devolution and other assistance are not adequate to cover the gap.
Q17. What is the probability of debt sustainability?
As mentioned above, the larger the proportion of government expenditure for accumulation of capital, the higher will be the growth rate of the economy and, in this case, the probability of debt sustainability will be higher.
Q18. What is the significance of the sustainability of public debt ratio?
The sustainability of public debt ratio is an important issue as it can be regarded as an indicator of the efficiency of public finance.