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States' debt to double by '07: Crisil

A Correspondent in Mumbai | July 16, 2003 15:03 IST

The combined debt of all the states in the country would double to Rs 12 lakh crore (Rs 12 trillion) by 2007, according to a report released by Crisil on Wednesday.

Consequently, the states' indebtedness (debt plus guarantees) in relation to their revenue receipts would increase from 2.8 times in 2002 to 3.6 times in 2007.

"Annual debt-servicing obligations (debt plus guarantees) would also rise dramatically to Rs 63,500 crore (Rs 635 billion) in 2007 from an estimated Rs 25,600 crore (Rs 256 billion) in 2002-03," the report said.

The findings are part of a forecast exercise undertaken by Crisil to estimate the future fiscal position of the states and underlines the fragile nature of state finances.

Crisil, while making the projections, has assumed that the revenue receipts of the states will grow at a lower rate over the next four years given the slowdown in the central government's tax collections and, consequently, transfers to the state governments.

The picture, however, could change significantly should there be a marked change in some key areas. Roopa Kudva, executive director and chief rating officer of Crisil, said: "If states successfully tackle issues of power sector subsidies and pension liabilities, and undertake expenditure reform measures, the future scenario may vary significantly from past trends."

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