Public Debt of Himachal Pradesh: A Granger Causality Approach

The present study makes an attempt to analyse the debt position of Himachal Pradesh and discusses various issues impinging upon its growth and structure. Main objective of the study is to examine the causal relationship between public debt and financial indicators of Himachal Pradesh, i.e. economic growth (in terms of GSDP), public expenditure, revenue receipts, grant in aid and repayment of old debt. For the analysis, present study covers a period of 37 years i.e. from 1980-81 to 2016-17. Various statistical tools and techniques such as exponential growth rate, granger causality test and multiple regression have been used to carry out the analysis. Test results indicate uni-directional causality in many of the cases. Economic growth (in terms of GSDP), public expenditure, revenue receipts and grant in aid do Granger cause public debt. However, public debt does not Granger cause economic growth (in terms of GSDP), public expenditure, revenue receipts and grant in aid. Analysis also revealed the existence of feedback effect in case of causality between repayment of old debt and public debt. Lastly, economic growth (in terms of GSDP), public expenditure, grant in aid and repayment of old debt appeared as positive determinants of public debt however, revenue receipts stood as a negative determinant of public debt in Himachal Pradesh.