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Stability of debt is ascribed to the way it has been financed — domestically, at fixed rates, for long term, and in local currency. While foreign investors have been virtually debarred, insulating the debt market from global shocks, domestic institutional investors (banks, provident funds and insurance companies) are mandated to hold a part of their balance sheets in government papers in the guise of 'safe assets'.
Downsides of high public debt — by using up the nation's savings, it crowds out private investments and interest payments leave inadequate resources for growth enablers, such as education, health, R&D and infrastructure — are hard to establish, resulting in their absence from the discourse.
Complacency has encapsulated states as well. Collectively, a third of India's public debt is held by states, larger than other federal economies. But states' debt is perceived to be as safe as that of GoI, if not more, due to its similar composition and the former's implicit guarantee. Masked in this safety is a remarkable heterogeneity across states.
State debts vary from less than 20% of respective state GDPs in Odisha, Maharashtra and Gujarat, to more than 45% in Himachal Pradesh and Punjab.
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