India’s government debt at safe levels: Nirmala Sitharaman

  • India’s debt-to-GDP ratio was at 81% in FY22, compared with 260.1% for Japan, 121.3% for the US, 111.8% for France and 101.9% for the UK, the FM said.

Gireesh Chandra Prasad
First Published13 May 2024
Union finance minister Nirmala Sitharaman. (Photo: Mint)
Union finance minister Nirmala Sitharaman. (Photo: Mint)(Shrikant Singh)

New Delhi: Finance minister Nirmala Sitharaman on Monday said India’s government debt, including that of states, is safe and prudent going by debt sustainability norms and that the country is in a better position than others. 

The minister’s defence of the government’s debt management comes amid a political debate over economic indicators and the track record of the ruling and opposition parties in office.  Sitharaman said in a social media post that India’s debt-to-GDP ratio was at 81% in FY22, compared with 260.1% for Japan, 121.3% for the US, 111.8% for France and 101.9% for the UK. 

Sitharaman said that in a comparative analysis with other low and middle-income countries too, India's external debt scenario was robust. The minister said India's share of short-term debt in the total external debt is 18.7%, which is lower than that of China, Thailand, Turkey, Vietnam, South Africa, and Bangladesh. 

A lower proportion of short-term debt is beneficial as it implies less immediate repayment pressure. When considering the ratio of total external debt to Gross National Income (GNI), India emerges as the third least indebted country among all such economies, the minister said.

BJP, Congress defend their stance

The ruling Bhartiya Janata Party and the opposition Congress party have in recent months defended how they managed the economy and government finances while in office and have criticized the way the other did. 

The ruling party had also tabled a ‘black paper’ in Parliament, accusing the previous United Progressive Alliance regime of undermining the country’s macroeconomic fundamentals, while the Congress hit back at the government citing price rice and unemployment. The manifestos of the two parties are loaded with their economic agenda for the nation. 

Experts said that the latest spike in debt levels is on account of the covid pandemic. The Centre’s fiscal deficit had gone up to 9.2% of GDP in the pandemic year of FY21 from 4.6% in the year before, but subsequently moderated to 5.8% in the revised estimates for FY24. For the current fiscal, the estimate is 5.1%.

“The combined debt-to-GDP ratio of 81% is primarily the result of the impact of covid-19 and the fiscal stimulus that was initiated at that time. When slippage happens, it happens all at once but improvement, which has been happening over the last two years, will take some more time before India reaches closer to the Fiscal Responsibility and Budget Management (FRBM) level which prescribes an overall debt level of 60% of GDP. It is still above that level and it will take a few years before we reach that level,” said EY chief policy advisor D K Srivastava. 

“On the other hand, some of the advanced countries which have run into very large debt are actually running unsustainable limits of debt, which is beginning to tell on their economic performance,” said Srivastava.

Sitharaman said the NDA government is building a legacy of growth, transparency, and responsibility, which are hallmarks of governance that cares for the nation's future. The minister said the share of India's total external debt to its exports is 91.9%, positioning the country as the fifth-least indebted country among low and middle income countries in this respect. 

The minister also said the government debt is overwhelmingly rupee-denominated, with external borrowings from bilateral and multilateral sources contributing to less than 5% of total debt. So exposure to volatility in exchange rates tend to be on the lower end, Sitharaman said in her post. 

Also Read | Government committed to developing skills among youth: Nirmala Sitharama







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