On IMF's warning on debt, Centre says India's borrowings still below 2002 level

The finance ministry highlighted a crucial point, asserting that the majority of India's general government debt, including both the Centre and states, is in rupees, with external borrowings constituting only a small fraction. The ministry pointed out the low rollover risk for domestic debt.

During its Article IV consultations with India, the IMF suggested that, in the face of adverse shocks, the country's general government debt could reach a 100% debt-to-GDP ratio by FY 2028.

The ministry clarified that this projection was presented as an extreme possibility akin to a "once-in-a-century Covid-19" event, among various favourable and unfavourable scenarios.

It emphasized that in this particular instance, the IMF was referring solely to a worst-case scenario, and it should not be considered a predetermined outcome.

The IMF report for India also suggests that, under favorable conditions, the General Government Debt to GDP ratio may decrease to below 70% during the same period, said the ministry's statement.

Despite global shocks like Covid-19 and the Russia-Ukraine war impacting the world economy uniformly, the ministry noted that India has performed relatively well and currently maintains a debt level below that of 2002.

Furthermore, the ministry underscored that the general government debt has witnessed a substantial reduction, decreasing from approximately 88% in FY 2020-21 to about 81% in 2022-23.

The Centre is reportedly on track to achieve its stated fiscal consolidation target, aiming to reduce the fiscal deficit to below 4.5% of GDP by FY 2025-26.