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How much public debt is threshold in India?

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Abstract

The study examines the threshold level of India's public debt from 1970 to 2019. The ARDL method finds that a country’s public debt is driven mainly by its gross fiscal deficit, real interest rate, and economic growth. In addition, the ratio of public debt to GDP has been used by the genetic algorithm method. The findings show that the ratio of public debt to GDP must be at most 61–64% in India. According to the results of this study, economic development is boosted when the national debt falls below a threshold level. Therefore, the current idea of public debt is supported by modern theory on public debt.

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Abbreviations

GDP:

Gross domestic product

GA:

Genetic algorithm

RIRt :

Real interest rate

MISt :

Exchange rate misalignment

CUBt :

Current account balance as a percentage of GDP

GFDt :

Gross fiscal deficit as a percentage of GDP

M2t :

Financial depth

GSt :

Government size

WDI:

World development indicators

ARDL:

Autoregressive distributed lag

VAR:

Vector autoregression

ADF:

Augmented Dickey–Fuller

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Acknowledgements

The author gratefully acknowledges the editor's and anonymous reviewers' suggestions. He also thanks Prof. Badri Narayan Rath for providing valuable suggestions. The usual disclaimer applies.

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  1. Department of Economics and Finance, Birla Institute of Technology and Science, Pilani, Pilani Campus, Pilani, India

    Debi Prasad Bal

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DB developed the idea, wrote the introduction and methodology, and interpreted the results and conclusion section.

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Correspondence to Debi Prasad Bal.

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Bal, D.P. How much public debt is threshold in India?. J. Soc. Econ. Dev. (2024). https://doi.org/10.1007/s40847-023-00308-2

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