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Informist, Thursday, Jan. 29, 2026

 

--EconSurvey: Can contain interest costs via active debt mgmt going forward 

--EconSurvey:States' debt, deficit trend underline need for fisc calibration

--EconSurvey: Govt fiscal trajectory stands out amid elevated global debt 

 

NEW DELHI – The increase in investor focus on general government debt, counting both central and state government issuances, is driving up sovereign bond yields, the Economic Survey for 2025-26 (Apr-Mar) said. India's benchmark 10-year gilt yield is 6.7%, compared with 6.3% for Indonesia, which has also been rated 'BBB' by S&P Global Ratings, the document released Thursday said.

 

"With Indian government bonds now globally indexed and investors increasingly assessing general-government finances, weak fiscal discipline at the State level can no longer be treated as locally contained—it increasingly affects the cost of sovereign borrowing," the Survey said. "States' fiscal priorities, perhaps, are casting a shadow on the sovereign's borrowing cost, as investors focus on the fiscal parameters of the general government rather than just those of the Union government."

 

India's fully-accessible route government bonds have been included in emerging market indices operated by JP Morgan, Bloomberg and FTSE Russell since 2024. Both Fitch Ratings and Moody's Ratings rate India a notch lower than S&P Global, at the lowest rung of investment grade, due to its high general government debt levels at about 80% of GDP as of March 2025.

 

States' fundraising through bonds is scheduled to rise to around INR 12.5 trillion in FY26, compared with an actual issuance of INR 10.7 trillion in FY25, which is seen increasing state debt-to-states GDP. Meanwhile, the Centre has targetted a debt-to-GDP ratio of 50%, plus or minus 1 percentage point, by March 2031, from 56.1% projected as on March 2025. The Survey said the government's fiscal trajectory stands out in a global environment where sovereign indebtedness is rising. The Centre's high interest costs – at over one-third of its net revenues in FY25 and projected for FY26 – is also likely to be contained through active debt management with bond buyback and gilt switch operations.

 

"However, emerging trends in State-level debt and deficits underscore the need for continued calibration," the Survey said.  End

 

Reported by Aaryan Khanna

Edited by Tanima Banerjee

 

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