Economics • Indian EconomyHard
How do debt-to-GSDP ratios in Punjab compare with fiscal sustainability benchmarks recommended by successive Finance Commissions for sub-national governments?
A. They frequently exceed recommended threshold limits, creating debt servicing pressures that constrain developmental capital outlays✓ Correct Answer
B. They remain exactly at zero due to perpetual fiscal surpluses generated by public sector undertakings
C. They are constitutionally capped at a maximum of five percent of national GDP
D. They are entirely financed through direct grants from foreign multilateral development banks without repayment obligations
💡 Solution & Explanation
Punjab's debt-to-GSDP ratio has historically remained on the higher side compared to benchmark recommendations, leading to substantial interest payment burdens that crowd out capital spending. Public sector undertakings do not generate perpetual surpluses that eliminate state debt. State borrowing limits are regulated by central statutes and constitutional provisions rather than a flat five percent national GDP cap. Foreign development assistance requires formal repayment and servicing.
More Economics Indian Economy questions
- What is the primary focus of the 'Production Linked Incentive (PLI) Scheme' introduced by the Government of…
- How does the Goods and Services Tax structure in India function as a destination-based consumption tax?
- What is the statutory role and mandate of the Finance Commission of India as constituted under Article 280 of…
- How does the calculation of India's Multidimensional Poverty Index published by NITI Aayog incorporate…
- What does the 'Fiscal Deficit' in the Union Budget of India represent?