A Study of Public debt sustainability in India during post-reform and COVID-19

Abstract : India is managing the Covid-19 fervently as it causes supply chain disruptions, health sectorrelated issues, lockdown and its impact on various sectors, unemployment, migration, hostile global environment, etc. The pandemic is causing sequential deceleration of all the parameters of macroeconomic factors of our country. The financial position of the Government is disturbed and it is taking all measures to curtail the downtrend that is set in by the pandemic. The financial position of the country is precarious as it is witnessing declining production and sales from the industries, shops have been closed and in turn expenditure from the people has declined. This resulted in a chain of causation viz., reduced output, unemployment, reduced wage or no wage, hike in prices etc. The ruthless effects are seen in reduced tax revenue but increasing public spending is ubiquitous as the appetite has enormously increased with its dwindle effect has resulted in mounting public debt in India. The total internal liabilities have increased from Rs. 317,704 in 1991-92 to Rs. 108,49,495 in 2020-21 and the growth rate is 3314.97 percent. The growth rate of total internal liabilities during Covid-19 is 35.46 percent. On the other hand, the total external liabilities have increased from Rs. 109,677 in 1991-92 to Rs. 589,997 in 2020-21 and the growth rate is 437.94 percent and its growth rate during Covid-19 is 15.09 percent. The economy gained better momentum due to reform measures initiated by NEP from 1991 onwards but it is shattered by the Covid-19 and its cascading effects. The spillover effects of Covid-19 is vividly seen in all the sectors and it has halted the growth of the country and the Government is taking measures to give momentum to it by way of several restoration measures. Hicksian theory is worth considering as he promulgated for bringing the economy back to its original peak position from the recessionary phase rather than allowing the economy to continue in recession and land up in depression. India can consider Keynes pumppriming concept and try to restore the economy by neglecting inflation which can be addressed later.