The public debt of Gujarat has jumped to Rs 3.40 lakh crore from Rs 3.20 lakh crore recorded at the end of March last year. The opposition and experts from the state have raised concerns over ballooning debt and falling revenues. Last year, Comptroller and Auditor General (CAG) had warned the state against rising public debt, noting that the state was “falling into a debt trap”
The latest figures were revealed by the government on Tuesday, February 28, while presenting the state’s annual budget. “Our earlier estimates had suggested Gujarat’s public debt will be Rs 3,50,000 crore. But, as per the latest revised estimates, it stands at Rs 3,40,000 crore. By next year, it will go up to Rs 3,81,000 crore as per our estimates,” said Mona Kanadhar, principal secretary (economic affairs) of the state’s finance department.
Another finance department official, J.P. Gupta, principal secretary, however, said that the state debt was well within the 27% limit of the Gross State Domestic Product (GSDP) in line with existing norms. “Our GSDP is Rs 22 lakh crore at present. At 27%, we can bear a debt of Rs 5.75 lakh crore. However, Gujarat’s debt is under Rs 3.5 lakh crore,” said Gupta, according to the news agency.
With the rise in public debt, every resident of the state has Rs 48,500 debt on their head in comparison to Rs 46,000 last year. In response to Opposition queries in the state assembly, the government said that it had paid Rs 23,063 crore in interest on public debt in the fiscal year 2021-22, and additionally, Rs 24,454 crore in debt was reduced and paid in instalments.
Last year in March, the CAG had warned the state of “falling into a debt trap”, noting that Gujarat would have to repay 61% (Rs 1.87 lakh crore) of its total Rs 3.08 lakh crore (old figures) of public debt in next seven years.
“Debt maturity and repayment profile indicate a commitment on the part of the government for debt repayment or debt servicing. The maturity profile of outstanding stock of public debt as on March 31, 2021 indicates that 61% of the total public debt would be repayable within the next seven years which may put a strain on government budget during that period,” the CAG report had warned.
The CAG was prescient. It had said, “In view of the increasing committed expenditure on one hand and revenue deficit on the other, the state government would have to work out a well-thought-out borrowing-repayment strategy to avoid falling into a debt trap.”
Experts from the state have raised concerns over the rise in the public debt. Eminent economist and former vice chancellor of Gujarat Vidyapith, Sudarshan Iyengar said, “Debt is required to run any state, but the key question is how this debt is repaid. Most state debts are repaid through various taxes, so if the state’s debt rises, it is almost certain that the government will raise taxes on the general public in the coming days to compensate.”
This article was originally published on ‘The Wire’ on March 3, 2023.