ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Something Other Than Debt Relief

Refinancing West Bengal

With a debt burden at around 37% of the state gross domestic product, which is almost twice the average of other states, West Bengal's finances are in a precarious situation. The primary reason for this is the state's inability to realise its own revenue potential - West Bengal's own tax revenue to state domestic product ratio is the lowest among all Indian states. The state also uses borrowings to finance its non-plan expenditure. The state government now wants the centre to restructure its debt and suspend its interest payments for three years. Analysing different scenarios, this paper evaluates whether such a relief package is necessary, or even the best way of avoiding a debt trap.

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