India’s debt ratio is expected to reach 84% of its GDP by the end of 2022 (IMF)

India’s debt ratio is expected to reach 84% of its GDP by the end of 2022, which is higher than many emerging economies, but its debt is a little easier to bear, a senior said. IMF official.

Stressing the importance for India to now have a very clear medium-term budgetary objective, Paolo Mauro, deputy director of the fiscal affairs department of the International Monetary Fund, said that there was still no not much clarity on the budgetary anchor.

“It would be very important to reassure people and investors that things are under control and things are going to become less vulnerable over time,” Mauro told PTI in an interview.

“In terms of debt ratio, India right now at the end of 2022, we project it at around 84% of GDP. That’s higher than in many emerging economies,” he said. Of course, India has a lot of special characteristics being the most populous country in the world right now and being a very big emerging economy, he said.

The other things that are special or distinctive compared to other emerging economies are that most of India’s debt is denominated in non-indexed domestic currencies and that there is a large Indian investor base. So those are good features to have and that’s what makes that debt a little bit easier to bear, Mauro said.

That said, the turnover, the need to borrow each year is very important. That’s about 15% of GDP, he said.

“So in some ways debt vulnerabilities are something to watch and be aware of in the fiscal deficit,” he said.

He noted that the budget deficit is around 10 percent of GDP right now.

This is slightly more than in most emerging economies. About 6.5% of GDP comes from the central government, the rest comes from the states, he said.

“I think given the global situation and the circumstances in each country, inflation is a bit high…looking at all those things, it makes sense to reduce the deficit and gradually reduce the debt over time. time. , says Mauro.

Another good thing for India is that growth is traditionally very high.

“This makes it possible to maintain this ratio at a stable level, or even to lower it if growth remains very strong. But without a reduction in the budget deficit, it would be difficult, on the one hand, to contain inflation and, on the other the other hand, also reduce the debt ratio, he said.

Mauro said there was also a need to reduce the deficit.

According to official data released last month, the central government budget deficit reached 32.6 percent of the annual target for the current fiscal year through August, from 31.1 percent recorded a year ago.

In real terms, the budget deficit – the difference between expenditure and revenue – was Rs 5,41,601 crore during the April-August period of this financial year.

Responding to a question, Mauro said that India has a very good information system which allows better distribution of cash transfers than in many other countries including some advanced economies.

One area where I would recommend reform would be, for example, fuel taxes, he said. It would be desirable if the fuel excise tax cuts were reversed, he added.

Fuel taxes have been reduced for everyone. The gains tend to go particularly to people who have cars, who are not necessarily the poor, they are people who can afford a car, to give just one example. So I would say lifting those fuel tax cuts would be something I would advise, he said.

Emphasizing budget transparency, Mauro said that beyond clarifying general budget targets, it is also important to provide information to the people on whom the government is spending the money, how much revenue they receive in a simple way so people can get an idea of ​​what’s going on. on.

“Fiscal transparency is therefore an area where further progress would be helpful,” he said.

(Only the title and image of this report may have been edited by Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)


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John A. Bogar