• UGI USER
  • Jul 04, 2024
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INDIA FACES HIGH DEBT BUT SUSTAINABLE FOR NOW

Why in the news?

  • India’s public debt is nearly 82% of GDP, but it remains sustainable due to the country’s high growth rate and the higher share of local-currency debt.
  • The high debt levels are manageable because of the higher real or nominal GDP and the predominance of rupee-denominated debt.

Debt Levels Data:

  • States hold one-third of the total debt, with levels expected to rise in the next five years under a ‘business-as-usual’ scenario.
  • Despite high Debt-to-GDP ratios in states like Punjab and Himachal Pradesh, sustainability is not an issue due to the Centre’s implicit guarantee and absence of foreign currency or floating rate debt.
Source: Phys
Debt-to-GDP Ratio

  • Definition: Measures a country’s public debt relative to its GDP, indicating the ability to repay debts.
  • Interpretation: Expressed as a percentage, it shows the number of years needed to repay debt if GDP is fully used for debt repayment.
  • FRBM Act Target:
    • Total: 60%
    • Central Government: 40%
    • State Government: 20%

Associated Article:

https://universalinstitutions.com/credit-growth-to-slow-to-14-due-to-risk-weights-gdp/