Risk profile of India’s government debt stands out as safe and prudent, says Nirmala Sitharaman

“How many welfare schemes would @RahulGandhi shut down to accommodate the fiscal cost of the ‘Khata Khat’ schemes?,” she said.  Last month, Congress leader Rahul Gandhi while addressing a rally made a poll promise saying that the party will transfer Rs 1 lakh in the account of one woman from every poor household in the country if they win the elections.

Sitharaman said India had a debt-to-GDP ratio of 81 per cent in 2022. “This is significantly lower than economies like Japan (260.1 per cent), Italy (140.5 per cent), the USA (121.3 per cent), France (111.8 per cent), and the UK (101.9 per cent) in the same period,” she said.

She also noted that central government debt is “overwhelmingly rupee-denominated, with external borrowings (from bilateral & multilateral sources) contributing a minimal amount (less than 5 per cent of total debt)”, which signifies that exposure to volatility in exchange rates tend to be on the lower end. The central government’s debt, which was 52.2 per cent of the GDP at the end of 2013-14, was reduced to around 48.9 per cent in 2018-19 through gradual fiscal consolidation. During this period, the fiscal deficit was lowered from 4.5 per cent in FY14 to 3.4 per cent in FY19.

However, due to the Covid-19 pandemic and proactive government measures to protect lives and livelihoods, the fiscal deficit surged to 9.2 per cent of the GDP in 2020-21, increasing the central government’s debt to 61.4 per cent of the GDP.  Post-pandemic, Modi-led government pursued a balanced approach to fiscal consolidation while sustaining economic growth. This strategy reduced the fiscal deficit from 9.2 per cent of GDP in 2020-21 to 5.8 per cent in the Revised Estimates for FY24, she said.