State governments are using more than a quarter of their domestic product to pay off accumulated debt instead of investing it in development activity.
The unhealthy debt position of the states can be gauged from the fact that per capita debt as a percentage of the per capita net state domestic product (NSDP) lies in the range of 23-90 per cent. Only one state, Maharashtra, has managed to maintain it below the 25 per cent limit set in the Tenth Plan.
With states paying around 12.5 per cent interest on their debt, at present, a significant portion of the NSDP is going into interest payments on accumulated debt.
The special-category states, which include the seven Northeastern states, Uttaranchal, Jharkhand, Chhattisgarh, Jammu and Kashmir and Himachal Pradesh, are ranked high in the list of states with a high debt component.
Sikkim tops the list. Its per capita debt of Rs 14,542 comprises 90 per cent of its per capita NSDP of Rs 16,143. Bihar is second. Its per capita debt of Rs 4,745 comprises 87 per cent of its per capita domestic product of Rs 5,466. It is followed by Orissa, where the level of debt at Rs 6,949 per head is 81 per cent of the value addition per person.
Himachal Pradesh, Jammu and Kashmir, Arunachal Pradesh and Manipur, with per capita debt as a percentage of their domestic products ranging from 60 per cent to 78 per cent, are among the top ten states. Assam and Meghalaya fare relatively better with their debts at 41 and 39 per cent of their NSDPs respectively.
Even in Punjab, debt takes up 55 per cent of the Rs 25,048 value addition per person, while in Rajasthan, it comprises 48 per cent of the per capita NSDP of Rs 13,116.
In Uttar Pradesh, Madhya Pradesh, West Bengal and Goa, the per capita debt ranges between 47 per cent and 41 per cent of the NSDP.
States in the western and southern parts of the country are in a better position. For both Gujarat and Kerala, 39 per cent of the value addition per person is used in paying off state debt. In Andhra Pradesh, the figure is 35 per cent, while it is 31 per cent in Haryana.
