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Informist, Thursday, Mar. 20, 2025

 

NEW DELHI – The finance ministry aims to reduce the general government's debt-to-GDP ratio, which includes the Centre's as well as state government's debt, to 75% initially and to 60% in the long run, Economic Affairs Secretary Ajay Seth informed Parliament's Standing Committee on Finance. Currently, the ratio is 82% or 83%, Seth said.

 

"Considering that we are at 80% plus, 60% is far off. First, we should come down to 75%," Seth told the panel. Out of the 82% or 83% general government's debt-to-GDP ratio, the Centre's debt accounts for 56% or 57%, Seth said.

 

The Budget for 2025-26 (Apr-Mar) has set a glide path to reduce the Centre's debt to 50.0% of GDP in a band of 49-51% by FY31 from 57.1% in FY25. While this plan can help bring down the general government debt-to-GDP ratio, it is not enough, Seth said. "The states also have to reduce their debt to GSDP (Gross State Domestic Product) ratio."

 

In its report, the Standing Committee on Finance recommended that the government adopt a "comprehensive and coordinated approach" to monitor the general government debt. "The committee feel that it is pertinent to mention that high levels of debt if not prudently managed, can crowd out private investment, increase borrowing costs and limit fiscal space for developmental and welfare expenditures," the committee said. "Thus, the committee would like to highlight that a well-managed general government debt framework is essential to have healthy fiscal balances, ensure adequate resource allocation; pruning wasteful expenditure and support long-term economic resilience."

 

"The committee further urge the government to enhance transparency, strengthen debt management frameworks and explore innovative financing mechanisms to sustain economic growth while maintaining fiscal discipline," the report said.  End

 

Reported by Krity Ambey

Edited by Saji George Titus

 

 

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