The senior IMF official recommended that India should adopt an ambitious fiscal consolidation plan in the medium term to reduce its deficits.
India’s current debt stands at 81.9% of its GDP, which is comparable to China’s 83%. Furthermore, when compared to the pre-pandemic levels in 2019 when it was at 75%, India’s debt has increased, though not significantly.
The official noted that a considerable portion of India’s fiscal deficit, which is projected to be 8.8% for 2023, results from expenditures on interest payments. India allocates 5.4% of its GDP to servicing this interest, and the primary deficit amounts to 3.4%, combining to reach the 8.8% figure.
However, the official highlighted that India’s debt is not projected to increase like China’s. In fact, it is expected to decrease slightly to 80.4% by 2028. A significant factor contributing to this trend is India’s robust economic growth. The debt-to-GDP ratio is influenced by the country’s economic expansion, and this, in turn, moderates the associated risks.
Another factor mitigating the risks is the extended maturities of India’s debt, reducing the need for frequent renewals. Additionally, a substantial portion of the debt is held domestically and denominated in domestic currency, further minimizing risks associated with foreign exchange fluctuations.
This story is from the October 12, 2023 edition of The Business Guardian.
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This story is from the October 12, 2023 edition of The Business Guardian.
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