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Informist, Monday, Apr. 6, 2026

 

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--Sitharaman: 2026 more challenging for India vs 2025
--CONTEXT: Finance Minister Sitharaman at NIPFP's golden jubilee celebration 
--Sitharaman: India continues to stand strong amid high global public debt 
--Sitharaman: FX reserves strong enough; govt can cover 11 months of imports 
--Sitharaman:Centre, states borrowing must be smart to lower interest burden 
--Sitharaman: Have fiscal room to allow RBI to cut rates, support economy 
--Sitharaman: Need states to be partners in Centre's fisc consolidation plan 
--Sitharaman: Road to Viksit Bharat by 2047 long, challenging

 

NEW DELHI – India is on a strong footing, both in terms of its macroeconomic fundamentals and fiscal management, with 2026 emerging as more challenging than 2025, with a "landscape of shocks" turning into "one of permanent volatility", Finance Minister Nirmala Sitharaman said Monday. "The escalation of Middle East (West Asia) conflict has evolved from a regional security concern into a systemic tremor, threatening the vital arteries of global energy and hardening the lines of a new multipolar world order," the finance minister said at the National Institute of Public Finance and Policy's golden jubilee celebration. 

 

The shift in the world order and rising uncertainties have made it more pertinent for emerging market economies to focus on public finances, Sitharaman said. "It is what it is, a world of volatility, uncertainty, complexity, and ambiguity all at once." Citing data from the International Monetary Fund, she said global public debt has surged to approximately $106 trillion, exceeding 95% of the global GDP itself, with the US having a debt-to-GDP ratio of 125% in 2025 and Japan at a staggering 235%. 

 

"Many advanced economies that spent decades running expansionary fiscal policies now find themselves with severely constrained policy space precisely when they need it most," she said. "Against this backdrop, India continues to stand out. Our general government debt-to-GDP ratio (which includes states' debt), at approximately 81%, is the lowest among major economies after Germany. More importantly, India is the only major economy where the IMF projects this ratio to fall significantly--to 75.8% by 2030--while the debt outlook for the advanced economies such as the US, China, Germany, and others is projected to worsen."

 

India's external debt-to-GDP ratio stood at just 19.1% at the end of September, among the lowest in emerging markets, Sitharaman said. "India's foreign exchange reserves, at over $688 billion (as of Mar. 31), provide import cover of approximately 11 months--a substantial buffer."

 

Lauding India's fiscal management, the finance minister said the country's prudent fiscal policy was not just about "austerity" or cutting back on expenditure but about spending resources efficiently and transparently. She also said a good public finance policy improves the counter-cyclical capacity of fiscal policy--especially the ability to "lean against the wind" in an economic downturn. "India has fiscal space--room to maintain our capex (capital expenditure) programme, room for the RBI to cut rates, room to offer targeted support to affected sectors," she said. "This is the dividend of a decade of fiscal discipline. This is the strategic value of fiscal prudence that pays dividends across decades."

 

Since the COVID-19 pandemic, Prime Minister Narendra Modi's government has focused on fiscal consolidation and increasing capital expenditure, steps appreciated by global credit rating agencies and economists. Based on the downward revision in India's nominal GDP as per the new series with 2022-23 (Apr-Mar) as the base year, the fiscal deficit for FY27 is pegged at 4.5% of GDP as against 4.3% assumed in the Budget for FY27.

 

The legroom to manoeuvre the economic requirements of the country, she said, was the outcome of "deliberate, sustained, and sometimes politically difficult choices" made over years of fiscal management. "For a rapidly progressing economy like ours, sound fiscal management is a policy imperative," the finance minister said.

 

She also said the Centre's sound fiscal management percolates down to the effective management practices adopted by the states. At present, there are issues in the states' own revenue mobilisation, debt management, and committed high expenditure even in lean years, she said. Both the Centre and the states must manage their borrowing programmes smartly to lower the interest burden, she said. "Borrowings have to be smart. We need to save the interest costs."

 

In her concluding remarks, Sitharaman said the road to Viksit Bharat 2047 is long and there are challenges ahead, including climate finance, sub-national fiscal reform, debt management, the fiscal implications of demographic change, the public investment return challenge, and technology-led disruptions. However, India is not merely on the move, it is on the right path, she said. "India is all set to scale new heights that were hitherto unseen."  End

 

US$1 = INR 93.06

 

Reported by Priyasmita Dutta

Edited by Rajeev Pai

 

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