Assessing the Long-Run Sustainability of Public Debt and Fiscal Deficit in India

Q2 Economics, Econometrics and Finance

Global Journal of Emerging Market Economies Pub Date : 2022-08-13 DOI:10.1177/09749101221113881

Abdhut Deheri, Ajit Nag

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Abstract

This article assesses the long-run sustainability of public debt and fiscal deficit in India for the period 1980–1981 to 2019–2020. The study estimated a model-based fiscal reaction function (FRF) using the Autoregressive Distributed Lag (ARDL) model to assess debt sustainability. The results revealed that the primary surplus responds positively and significantly to the previous period debt in both the short- and long-run. This implies that the fiscal policy satisfies the intertemporal budget constraint (IBC) and follows the debt-stabilizing rule. Next, to assess the sustainability of the fiscal deficit, we examined the long-run association between total revenues and total expenditures using a structural break cointegration test. The results revealed that they are cointegrated, implying that IBC is met and the fiscal deficit is sustainable. The results of long-run estimation provide evidence in support of strong budgetary sustainability. Overall, the results indicate that the public debt and the fiscal deficit are sustainable in India. From a policy standpoint, our research suggests that the government should take the necessary measures to reduce the growing public debt to ensure its long-run sustainability.

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评估印度公共债务和财政赤字的长期可持续性

本文评估了1980-1981年至2019-2020年期间印度公共债务和财政赤字的长期可持续性。该研究使用自回归分布滞后(ARDL)模型估计了基于模型的财政反应函数(FRF)，以评估债务可持续性。结果表明，无论是短期还是长期，初级盈余对前期债务都有显著的正向反应。这意味着财政政策满足跨期预算约束(IBC)，并遵循债务稳定规则。接下来，为了评估财政赤字的可持续性，我们使用结构断裂协整检验检验了总收入和总支出之间的长期关联。结果表明，它们是协整的，这意味着IBC是满足的，财政赤字是可持续的。长期估计的结果为支持预算的强大可持续性提供了证据。总体而言，结果表明印度的公共债务和财政赤字是可持续的。从政策的角度来看，我们的研究建议政府应采取必要措施减少日益增长的公共债务，以确保其长期可持续性。

本文章由计算机程序翻译，如有差异，请以英文原文为准。

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来源期刊

Global Journal of Emerging Market Economies Economics, Econometrics and Finance-Economics, Econometrics and Finance (miscellaneous)

CiteScore

2.70

自引率

0.00%

发文量

期刊介绍： Global Journal of Emerging Market Economies is a peer-reviewed journal. The aim of the journal is to provide an international platform for knowledge sharing, discussion and networking on the various aspects related to emerging market economies through publications of original research. It aims to make available basic reference material for policy-makers, business executives and researchers interested in issues of fundamental importance to the economic prospects and performance of emerging market economies. The topics for discussion are related to the following general categories: D. Microeconomics E. Macroeconomics and Monetary Economics F. International Economics G. Financial Economics H. Public Economics I. Health, Education, and Welfare J. Labor and Demographic Economics L. Industrial Organization O. Economic Development, Innovation, Technological Change, and Growth Q. Agricultural and Natural Resource Economics • Environmental and Ecological Economics R. Urban, Rural, Regional, Real Estate, and Transportation Economics Additionally, the journal would be most interested to publish topics related to Global Financial Crisis and the Impact on Emerging Market Economies Economic Development and Inclusive Growth Climate Change and Energy Infrastructure Development and Public Private Partnerships Capital Flows to and from Emerging Market Economies Regional Cooperation Trade and Investment and Development of National and Regional Financial Markets The Belt and Road Initiative.