The rapid deterioration in the debt situation of eight states, including Maharashtra, West Bengal, Rajasthan, Punjab and Kerala, has sent alarm bells ringing.
By the end of the next fiscal, these states will find it difficult to service their debts, both in terms of interest and principal repayments, according to finance ministry officials.
For these states, the ratio of consolidated debt to revenue receipts exceeded 300 per cent, the officials said. Besides unsustainable levels of debt, increasing guarantees and ballooning interest payments threatened to seriously undermine their fiscal positions, they added.
In states like Orissa, West Bengal and Himachal Pradesh, salaries, pensions and interest payments are over 100 per cent of their total revenue receipts, which includes transfers from the Centre.
The outstanding debt of all states has more than doubled in the last five years, from Rs 3,29,171 crore in 1997-98 to Rs 6,71,653 crore in 2002-03. As a percentage of the gross domestic product (GDP), it increased from 23.7 per cent to 29.8 per cent during the period.
Similarly, the outstanding guarantees of 17 major states jumped 162 per cent to Rs 1,66,116 crore between 1997 and 2002, pushing them further into the red.
The guarantees extended to public sector undertakings, state electricity boards, co-operatives and special purpose vehicles form part of the states
