The Finance Ministry has raised that a majority of India’s general government debt, which includes those of the Centre and states, is in rupees, and external borrowings make up only a small portion.
In view of the latest International Monetary Fund (IMF) report that cautions India over its alleged government debt vulnerabilities, the central government on Friday said that certain presumptions have been made, which do not reflect the factual position.
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The Finance Ministry has also pointed out that a majority of India’s general government debt, which includes those of the Centre and states, is in rupees, and external borrowings make up only a small portion. The ministry further stated that the rollover risk for domestic debt is low.
“Under adverse shocks, general government debt is likely to exceed 100 percent of India’s gross domestic product (GDP) by FY2028,” NDTV reported quoting IMF in its annual Article IV consultation report.
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The report further mentioned that the long-term debt sustainability risks are high due to the significant investment required to meet India’s climate change mitigation targets.
Following this, the ministry clarified that the situation IMF mentioned was an extreme possibility like “once-in-a-century Covid-19” and was among various favourable and unfavourable scenarios that were listed. Emphasising on the extreme instance, the Finance Ministry said that the financial agency was talking only of a worst-case scenario and this is not a “fait accompli”.
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The ministry further highlighted the higher extreme scenarios for other countries in the report — 160% for the US, 140% for the UK and 200% for China.
The IMF report for India also indicates that, under favourable circumstances, the General Government Debt to GDP ratio may decline to below 70 per cent in the same period, the ministry said.
The Finance Ministry argued that shocks like Covid-19 and the Russia-Ukraine war have uniformly impacted the global economy. “India has done relatively well and is still below the debt level of 2002,” the Ministry added.
