Sustainable debt-GSDP ratio for Tamil Nadu is 23%, says economic consultant to government
Economic consultant K.R. Shanmugam suggests that Tamil Nadu's sustainable debt-to-GSDP ratio should be 23%, slightly higher than the national prudent limit of 20%. He argues that borrowing is acceptable if funds are directed toward productive infrastructure that generates future economic growth.
Why it matters
Understanding sustainable debt levels is critical for state fiscal policy and long-term economic stability in India.
Amid the raging debate over Tamil Nadu’s level of public debt, economic consultant to the State government, K.R. Shanmugam, says the sustainable level of the debt-gross state domestic product (GSDP) ratio for the State is 23%.
Arguing the case for the reduction of the level from the existing 27%, Mr. Shanmugam says though the Fiscal Responsibility and Budget Management (FRBM) Committee headed by former civil servant N.K. Singh, in its report prepared in 2017, prescribed 20% as the prudent limit for the States in general, an allowance of an additional three percentage points can be provided for Tamil Nadu, considering the progress of macroeconomic factors in the last five-odd years.
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