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VOL. 11, ISSUE 1 (2026)
Kerala’s debt scenario: An ongoing debate
Authors
Vinati
Abstract
Kerala’s rising public debt has remained a subject of intense academic
and policy debate, particularly in the context of concerns regarding fiscal
sustainability and adherence to fiscal responsibility norms. This paper
critically examines the state’s debt scenario over the period 2000–01 to
2021–22 by analysing debt trends, debt sustainability, and the competing
perspectives surrounding Kerala’s fiscal position. Using secondary data from
the Comptroller and Auditor General (CAG), RBI publications, and other official
sources, the study reviews the evolution of Kerala’s debt profile and evaluates
the sustainability of its borrowing through Bohn’s Sustainability Framework,
threshold regression, and the Autoregressive Distributed Lag (ARDL) model. The
findings indicate that although Kerala’s debt-to-GSDP ratio has consistently
remained above the prescribed fiscal threshold and increased significantly
during the COVID-19 pandemic, the rise is largely attributable to economic
contraction rather than fiscal mismanagement. The study estimates a sustainable
debt-to-GSDP threshold of 27.8 percent, beyond which public debt adversely
affects economic growth. Simulation results suggest that Kerala can restore
debt sustainability by 2032 through a combination of higher economic growth and
prudent fiscal management without compromising essential investments in health,
education, and social welfare. The paper argues against simplistic
interpretations of debt indicators and critiques conventional assessments that
advocate contractionary fiscal policies. Instead, it emphasizes balanced debt
management strategies that preserve Kerala’s development-oriented public
expenditure while ensuring long-term fiscal sustainability. The study
contributes to the ongoing discourse on sub-national fiscal management by
proposing a pragmatic framework for achieving sustainable debt without
undermining inclusive development.
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Pages:141-144
How to cite this article:
Vinati "Kerala’s debt scenario: An ongoing debate". International Journal of Advanced Research and Development, Vol 11, Issue 1, 2026, Pages 141-144
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