Is Goa's debt sustainable?

Abstract

This paper analyses the debt sustainability issues of Government of Goa. The study reveals strong correlation between debt to GDP ratio and primary balance to GDP ratio. Assuming key parameters at baseline level and pegging the fiscal deficit at the level of BE 2006-07, the debt to GDP ratio is expected to improve by the year 2011-12. High levels of standard deviation in historical averages of key parameters indicate worsening of debt to GDP ratio under different scenarios if macro economic variables continue to show historical trend. Nevertheless, the debt to GDP ratio at the end of projection period is expected to remain below the baseline level under all the six scenarios indicating that the State is expected to sustain the debt to GDP ratio up to 2011-12. If the real GDP growth rate is more than the real interest rate then the State will be able to stabilize the debt to GDP ratio at 27.72 percent even with primary deficit.