Which metric is more meaningful in UP: Total debt or debt-to-GDP ratio?

UP’s outstanding debts stood at Rs 4,73,348.2 crore (Rs 4.73 trillion) as of March 31, 2017. The 2022 (BE) state budget forecast shows this amount increased by 38% to Rs 6,53,307.5 crore.

“If a state is experiencing economic growth, it’s possible that there are social priorities that need funding. That’s why we see debt levels rising,” said Suranjali Tandon, assistant professor at the National Institute of Public Finance and Policy.

But, while the absolute value of debt has increased by around 38%, the proportion of debt to government GSDP has fallen from 36.7% as of March 31, 2017 to 34.2% (FY22 BE ). This means that during the same period, the state’s GSDP also increased from around 10 trillion rupees to around 19.1 trillion rupees (BE).

Which measure is more meaningful: total debt or the debt-to-GDP ratio? Dharmakirti Joshi, chief economist at CRISIL, says the debt-to-GDP ratio is relatively important because “you’re always looking at debt versus income. The GSDP is the revenue of the state and the outstanding liabilities are examined against the debt of the state”.

From 2005 to 2014, the absolute value of UP’s debt grew at an average rate of Rs 14,441 crore. But from 2015 to 2022, absolute debt increased at an average rate of Rs 48,382.85 crore – more than 3 times the rate of increase between 2005 and 2014. UP’s gross budget deficit increased from Rs 32 513 crore to Rs 53,196 crore (BE) in 2021.

Source: IndiaSpend

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