States facing challenges to manage debt burden: Ex-Chief Secy in new book
Kolkata: The states are now facing increasing challenges in managing their debt burden due to the changing fiscal landscape. The stoppage of GST compensation from 2022, unilateral increase in the number of Centrally-sponsored schemes in which the states have to share 40-50 per cent of the burden and gradual decrease in the Central transfers to the states by way of devolution from Central taxes due to increasing tendency of the Central government to impose cesses which is not shared with the states, have been a sore point with the states. All the states have time and again raised these issues before the Central finance commissions but the problems remain. Over and above this, stoppage of funds to the states on some grounds or the other also puts strain on the state finances.
Post-Covid, the Indian economy is in a state of flux. Former chief secretary Harikrishna Dwivedi, an able administrator with years of managing state finances, has highlighted the challenges and major concerns which the states face today in the changed fiscal landscape. In his recent book he has also tried to find out the possible solutions.
The author has highlighted that the states will be able to cope with these challenges arising out of skewed Centre-state fiscal relations only with the right policies of the Central government. The 48th International Kolkata Book Fair started with a charm of one of the most vital books our society can ever demand. On the day of the inauguration of the Kolkata Book Fair, Chief Minister also released book of Dr Hari Krishna Dwivedi, “DEBT SUSTAINABILITY OF SUBNATIONAL GOVERNMENTS IN INDIA: LESSONS FROM INTERNATIONAL DEBT CRISES,” published by OXFORD UNIVERSITY PRESS. Dwivedi is a retired IAS officer; he was earlier Chief Secretary of the Government of West Bengal.
He has previously served in many key positions, including state finance secretary and head of taxation. He was a recipient of the Joint Japan/World Bank Graduate Scholarship Program in 2004-05, under which he pursued an M.Sc. in Development Management from the London School of Economics (LSE). He also holds a PhD in Development Studies from Calcutta University. He is presently the Chief Advisor (Finance) to the Hon’ble Chief Minister of West Bengal. A prolific writer, his publications primarily cover topics such as community participation, women’s empowerment, rural development, debt sustainability, local body finances, state finances, fiscal consolidation and fiscal federalism. Dwivedi’s current book focuses on
evaluating states’ debt sustainability in light of numerous new problems and obstacles to their fiscal health to offer actionable suggestions that might guarantee the financial stability of subnational governments in India and around the globe — concentrating on the provincial or state governments.
In 2020, global debt as a percentage of GDP surpassed 100 per cent for the first time. Given that Sri Lanka and Pakistan have already experienced debt crises, there are worries about where the next one would occur, even though it has somewhat decreased since then.
Although macroeconomic conditions and India’s general fiscal health are solid, this may not always be the case when talking about India’s subnational entities. To provide useful and realistic suggestions that can guarantee the fiscal health of the subnational governments in India and around the world, Dwivedi analyses the debt sustainability of states in light of numerous new problems and challenges to their fiscal health Debt Sustainability of Subnational Governments in India: Lessons from International Debt Crises. With an emphasis on state or provincial governments, Dwivedi discusses the debt that these governments incur to finance their programs and investigates if they are engaging in excessive debt.
The book fundamentally focuses on a few vital features: Firstly, it provides policymakers with recommendations by combining Indian data and past experiences with subnational debt crises. It examines the benefits and drawbacks of stringent fiscal regulations to support the creation of creative fiscal regulations.
Finally, it offers a different and more accurate method for calculating the sustainability of debt that takes into consideration erratic transfers from the Central government.
The book’s major objective is still to offer workable and realistic suggestions that will guarantee the financial stability of subnational governments in India and other federal nations worldwide.
It covers several topics, such as trends in state government debt (subnational debt), new problems that present difficulties for state finances, advice on how to prevent debt from getting out of control and international experiences with excessive borrowing or debt creation and the lessons learned from them.
