India needs to curb a borrowing spree by its state governments
Savings in the central-government budget are more than offset by splurging by the states
WHICH Indian state sounds more likely to repay a loan: Bihar, the country’s poorest, with a budget deficit of nearly 6% of its state GDP last year and a hole in its finances after it banned alcohol sales; or Gujarat, a relatively prosperous coastal region with a deficit nearer to 2%? According to bond markets at least, both are equally good credits, and so pay the same interest rate. As welcome as such mispricing might be to the Bihari authorities, it is brewing trouble for the rest of the Indian economy.
This article appeared in the Finance & economics section of the print edition under the headline “Pumping the country dry”
Finance & economics May 13th 2017
- India needs to curb a borrowing spree by its state governments
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- In China, a TV soap on corruption attracts a mass following
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- William Baumol, a great economist, died on May 4th
- 2017 Marjorie Deane internship
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