Abstract
This article utilizes the Bohn framework for panel data and penalized spline technique for testing public debt sustainability in 20 major Indian states during 2007-08 to 2018-19. The study shows that the primary surplus reacts positively to public debt only in 4states, indicating debt sustainability in these states. Interestingly, the reaction coefficients are time-varying in 10 states, of which three are sustainable. Further, we descriptively verified whether the sustainable debt is welfare-enhancing as well during the study period. We found that debt is neither sustainable no welfare-enhancing in the case of 12 states, so they need to take corrective actions.
Conflict of Interest
The authors declare no conflict of interest.
Ethical Approval
Not applicable
Data Availability
The datasets used in this study are openly available at [repository link] and the source code is available on GitHub at [GitHub link].
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