Public Debt Framework for Kerala, India: Fiscal Sustainability, Institutional Reform and Intergenerational Equity

Abstract

Background: Persistent deficit financing and the increasing burden of interest payments suggest that a considerable proportion of public borrowing is being utilised to support current expenditure rather than productive capital investment. Furthermore, interest obligations consistently account for nearly one-fifth of total revenue receipts, thereby constraining the fiscal capacity available for developmental and growth-oriented expenditure. Aims: This review attempts to examine the theoretical foundations of public debt management and analyses the evolving debt profile of Kerala within the broader framework of fiscal sustainability. Methodology: Data on fiscal and debt indicators, structure, composition and growth of public debt in Kerala over the years since 2001 has been used for the discussion. The databases of RBI, Kerala state budget documents and Economic Review of various years are the major data sources used here for the purpose. Results: A comprehensive and forward-looking public debt management framework that balances welfare commitments with fiscal sustainability is very important for Kerala. Institutional reforms such as a dedicated Public Debt Management Office, regular public disclosures, independent audits, and fiscal council reviews would strengthen fiscal credibility and investor confidence. Kerala must link borrowing with long-term economic transformation. Kerala’s debt policy must move beyond narrow deficit management towards a broader institutional framework rooted in transparency, accountability, growth orientation, and intergenerational equity. Conclusion: A well principled fiscal architecture will help Kerala to preserve its welfare achievements while ensuring long-term fiscal resilience and sustainable economic transformation. Study Significance: Studying public debt and fiscal sustainability have a great economic importance, especially given the increasing debt of countries in general and developing countries in particular, which jeopardizes the economy and growth if it exceeds reasonable limits, thus predicting crises and further debt accumulation.