In view of the alarming rise in the indebtedness of the state governments, indiscriminate borrowing needs to be curtailed and instead be directed by forces of market evaluation, Associated Chambers of Commerce and Industry (Assocham) president KP Singh said.

The indebtedness of the state governments have risen to Rs 11,555 crore in 1997-98 from Rs 7847 crore in 1995-96.Singh said debt rescheduling should be allowed only after considering the overall debt position and waivers should be resorted to sparingly in exceptional circumstances. "Cases where a state government gets debt relief on the one hand and foregoes revenue on the other by resorting to populist measures need to be discouraged," singh said.

The states with better fiscal management should be allowed to write-off five per cent of their outstandigdebt to the centre, Singh sid adding states under fiscal stress needs to be given special care.