Public Debt of Kerala State and Related Risk Analysis: An Econometric Study

The growing fiscal obligations of Kerala are increasingly met from debt liabilities.This has led to a significant increase in the market borrowings of the state during the last decade. The increased reliance on market borrowings results in public debt accumulation and high debt servicing costs. To secure governments low-cost funding over the medium and long term while avoiding excessive risk, an assessment of public debt is crucial. This study empirically analysed the present debt profile of Kerala in terms of costs, maturity, and potential risk factors. In addition, this study determined the dynamic relationship between the public debt and economic growth of the state by using the autoregressive distributed lag (AR.DL) models. Our results reveal that public debt exerts a nonlinear impact on economic growth in both the long and short run in Kerala, and this impact may be described by an inverted U-shaped relationship.