Another spike in debt-to-GDP ratio unlikely

CHANCES OF INDIA'S public debt rising again after being off the pandemic-induced peak in FY21 are remote, experts said. Instead, over the next five years or so, the debt-GDP ratio could return to the pre-pandemic levels, most of them feel.

- PRASANTA SAHU

• REVENUE BUOYANCY, SUSTAINED CAPEX MAY BRING IT DOWN TO PRE-COVID LEVELS IN 4-5 YEARS

The optimism stems from the belief that the government is unlikely to materially digress from the fiscal glide path over the next few years.

Also, the prospects of a steep fall in global commodity prices leading to very low inflation and nominal GDP expansion are slim in the near term.

Redemption pressures are unlikely to be too high to upset the calculations of the Reserve Bank of India, the manager of public debt.

The buoyancy in tax collections is expected to stay, allowing the government to retain capex at somwhat elevated levels, and gradually lower the debt over the medium term.

Responding to the International Monetary Fund's recent forecast of India's general government debt overshooting 100% of the GDP under a worst-case scenario by FY28, the finance ministry has stated the Centre is "on track to achieve its stated fiscal consolidation target" of reducing fiscal deficit below 4.5% by FY26.What IMF referred to was not a baseline scenario, and any global shock would equally affect all countries, the ministry noted.

The ministry added that sticking to the glide path is necessary for India to curb general government debt, and prevent it from rising again.