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Informist, Monday, Jul 22, 2024

--EconSurvey: General govt debt-to-GDP ratio likely to start falling 

--Econ adviser: India external debt ratio better than several nations 

--EconSurvey: Must balance inward-looking policies vs outward-looking 

NEW DELHI – The government's commitment to the fiscal consolidation roadmap has helped keep the macroeconomic environment stable and provide a platform for sustainable growth, the Economic Survey for 2023-24 (Apr-Mar) said today. 

The fiscal deficit of the government is expected to drop to 4.5% of GDP or lower by 2025-26. "This commitment has helped keep the sovereign debt sustainable, thereby keeping sovereign bond yields and spreads in check," said the survey tabled by Finance Minister Nirmala Sitharaman in Parliament today. The 10-year benchmark gilt yield fell 25 basis points in 2023-24 to 7.06% on Mar 28.

In line with the fiscal consolidation roadmap, the government aims to lower the fiscal deficit to 5.1% of GDP in the current financial year. The adherence to the glide path is through prudent fiscal management, the survey said, adding that it has led to a reduction in macro vulnerability. 

As per the survey, increased prospects of monetary policy easing, along with an uptick in wholesale price inflation coupled with the government's continued commitment to fiscal consolidation, will help India's general government debt-to-GDP ratio to start falling. Currently, general government debt is over 87%, as against the 15th Finance Commission's recommendation of 60% general government debt. 

At the post-survey press conference, Chief Economic Adviser V. Anantha Nageswaran also said that India's external debt ratio is currently better than many nations. In the wake of the COVID-19 pandemic and geopolitical tensions, many countries--especially low and middle-income countries--grappled with high debt levels, including island country Sri Lanka. 

India's external debt was at $663.8 bln as of March end, up $39.7 bln, or 6.4%, from a year ago, data released by the Reserve Bank of India showed. The external debt as a percentage of GDP declined to 18.7% as of Mar 31 from 19.0% a year ago. Of the total debt, $541.2 bln, or 81.5%, was long-term debt and $122.5 bln, or 18.5%, was short-term, the data showed.

As part of the medium-term outlook, the survey said that a global trust deficit is driving countries to pursue policies focused on enabling them to become self-reliant and protect them from external shocks, especially in sectors of strategic importance. "Therefore, the balance between inward-looking policies versus outward-looking policies needs to become more nuanced going forward," it said.   End

US$1 = 83.66 rupees

Reported by Priyasmita Dutta

Edited by Akul Nishant Akhoury

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