Thiruvananthapuram: A recent study report from the Gulati Institute of Finance and Taxation (GIFT), a state government institution, sounds the alarm on the escalating public debt situation in Kerala. According to GIFT’s study, Kerala is grappling with a significant challenge in managing its public debt, and if the current trend persists, the state may find itself repeatedly resorting to borrowing to fulfill its immediate financial obligations.
The state government has struggled to rein in its debt levels, except for a brief respite observed from 2004–05 to 2012–13. Since the turn of the millennium, public debt in Kerala has surged from Rs 25,721 crore in 2000–01 to a staggering Rs 3.57 lakh crore. The study underscores that the ability of a state to manage its debt effectively is contingent on the proportion of debt relative to its Gross State Domestic Product (GSDP). Last year, the GSDP-debt ratio reached 39 percent in the state.
The GIFT report recommends that the government take measures to bring the public debt down to below 27.8 percent of the GSDP. Assistant Professor Dr. P. S. Ranjith, who led the study, suggests that adopting austerity measures, which could adversely affect social security, may not be the prudent course of action. Instead, the government should explore borrowing at favourable interest rates and seek assistance from the central government as a viable solution to navigate the current financial crisis.
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