India maintains debt levels below 2002 despite IMF report: Finance Ministry

New Delhi, December 23: India's finance ministry responded to the International Monetary Fund's recent cautionary report regarding the country's alleged vulnerabilities in government debt. Contrary to the IMF's concerns, the ministry highlighted discrepancies in the assumptions made, stressing that the factual situation differed from the projected scenarios.

A significant portion of India's general government debt, encompassing both central and state debts, exists in rupees, with external borrowings constituting a minor fraction. This assertion by the ministry aimed to underscore the minimal risk associated with domestic debt rollovers. During its Article IV consultations with India, the IMF suggested that India's general government debt could reach 100 per cent of the debt-to-GDP ratio by FY 2028 in adverse circumstances. The finance ministry clarified that this projection was an extreme scenario akin to the once-in-a-century impact of Covid-19. It emphasised that the IMF's assessment represented a worst-case possibility and not an inevitable outcome.

Comparatively, the ministry highlighted IMF reports for other nations, showcasing considerably higher extreme scenarios: 160 per cent for the US, 140 per cent for the UK, and 200 per cent for China. Additionally, the IMF report for India indicated that, under favourable conditions, the General Government Debt to GDP ratio might decline to below 70 per cent during the same period.Despite global economic upheavals triggered by events like Covid-19 and the Russia-Ukraine conflict, India's relative resilience was underscored by the ministry. It noted that India had fared relatively well and, notably, maintained a debt level lower than that of 2002.

Highlighting a significant reduction in general government debt from around 88 per cent in FY 2020-21 to approximately 81 per cent in 2022-23, the ministry showcased a positive trend. Moreover, it outlined the Centre's commitment to achieving its fiscal consolidation target by reducing the fiscal deficit to below 4.5 per cent of GDP by FY 2025-26. This reaffirmed the government's dedication to sound fiscal management despite global challenges.