• UGI USER
  • Feb 07, 2024
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INDIA’S FISCAL PERSPECTIVE – A NUANCED APPROACH

Focus:

  • Traditional rigid fiscal targets are losing credibility worldwide.
  • Finance Secretary emphasizes a more nuanced and realistic approach to debt sustainability.

About the Fiscal Outlook:

  • India’s high growth trajectory enables a gradual decline in debt-to-GDP ratio.
  • Inflationary risks persist, requiring a delicate balance between growth and managing price rise concerns.
  • The pre-pandemic goal of reducing Central government debt to 40% of GDP needs recalibration.
  • Advocates a gradual decline in debt-to-GDP ratio, considering India’s favorable growth-rate interest-rate differential.
Key Term

Debt-to-GDP ratio:

Source: Business Standards

·    The Debt-to-GDP ratio measures a country’s total debt relative to its gross domestic product (GDP).

·    It indicates the proportion of a nation’s economic output that is owed as debt.

·    A higher ratio suggests a heavier debt burden and may signal economic vulnerability if unsustainable.

·    According to the FRBM Act, the Debt-to-GDP ratio is targeted at approximately 60%;

o    40% allocated for the Central Government and

o    20% for the State Government.