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Business News/ Economy / Looking at steps to bring down public debt: Sitharaman

Looking at steps to bring down public debt: Sitharaman

The central government’s debt stood at ₹155.6 trillion, or 57.1% of GDP, at the end of March 2023

Finance minister Nirmala Sitharaman. Premium
Finance minister Nirmala Sitharaman.

New Delhi: The finance ministry is looking at ways to bring down government debt and is monitoring the debt reduction measures taken by emerging market economies, finance minister Nirmala Sitharaman said on Friday.

While India’s public debt is not as high as other major economies’, it needs to be tackled with a sense of responsibility so that the future generations don’t feel its burden, she told the Kautilya Economic Conclave.

“Data about some emerging market countries, about how they are managing their debt, is something which is actively in our minds in the ministry," Sitharaman said.

“We are looking at ways in which we can bring down the overall debt," she said, adding that the government’s debt reduction efforts have been streamlined.

“I am sure we will be able to bring this down."

The central government’s debt stood at 155.6 trillion, or 57.1% of gross domestic product (GDP), at the end of March 2023. During the same period, the debt of state governments stood at about 28% of GDP.

High debt and the high cost of debt servicing have been challenging for India in its bid to improve its credit ratings.

However, the government expects to meet its fiscal deficit target of 5.9% of GDP during the ongoing fiscal year.

It aims to reduce the fiscal deficit to 4.5% by FY26 on the back of fiscal consolidation efforts.

Meanwhile, Sitharaman also said the effectiveness of multilateral institutions is declining, not just developmental banks but also institutions like the United Nations, World Trade Organization, and World Health Organization.

“The level of effectiveness that they were to bring in is a less-than-ideal position," she said.

Sitharaman said that while wars and conflicts are disrupting key supply chains, global terrorism is bringing more risks into business decision-making.

The conflicts between Russia and Ukraine, and Israel and Hammas have disrupted supply chains, thus impacting the world economy. The Ukraine war especially had led to an increase in the prices of several commodities, including energy prices.

“The big elephant in the room now is the impact of terrorism across the globe," Sitharaman said, adding economic policies alone are insufficient to address the concerns around terrorism.

Many countries are returning to coal for base load energy in uncertain times, she added.

Meanwhile, the Reserve Bank of India's (RBI) governor Shaktikanta Das, who spoke at the Kautilya Economic Conclave, said the central bank remains extra vigilant on evolving inflation dynamics, highlighting the need to see a sustained decline in inflation to reach the 4% target.

"In the current situation, monetary policy must remain actively disinflationary to ensure that the ongoing disinflation process progresses smoothly," Das said.

He added interest rates are likely to remain high as the RBI remained extra vigilant to ensure its sustained decline.

During the latest monetary policy meeting of the central bank in October, the RBI kept the repo rate unchanged at 6.5%. However, this has been hiked by 250 basis points since May 2022. Central banks target inflation as the primary metric for monetary policy.

Meanwhile, retail inflation cooled in September, retreating within the central bank’s comfort zone (4-6%). Consumer Price Index (CPI)-based inflation eased for the second consecutive month in September to 5.02%, aided by a slower rise in vegetable prices.

"For India, macroeconomic fundamentals continue to be sound. The Indian rupee is stable, we are there in the market to prevent excess volatility," he added.


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Rhik Kundu
Rhik writes about the Indian economy and its crucial indicators. He is constantly navigating corporates, decoding policies, and dabbling with everything in between.
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Published: 20 Oct 2023, 10:25 PM IST
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