India’s Debt To GDP At 68.6 – Free PDF Download

WHAT IS THE DEBT-TO-GDP RATIO?

• The debt-to-GDP ratio is the metric comparing a country’s public debt to its gross domestic  product (GDP).

WHAT DOES THE DEBT-TO-GDP RATIO INDICATE?

• As a rule, the higher a country’s debt-to-GDP ratio climbs, the higher its risk of default becomes.
• When a country defaults on its debt, it often triggers financial panic in domestic and international markets.

STATUS PAPER ON GOVERNMENT DEBT

• Since 2010, the central government has been publishing an annual Status Paper on Government  Debt that provides a detailed account of the  overall debt position of the country.
• This was the ninth paper of the series.

• The central government’s debt as a percentage of gross domestic product (GDP) dropped marginally by 0.1% from  8% in fiscal 2017-18 to 45.7% or Rs 86.73 lakh crore.
• The general government debt to GDP ratio, which includes the combined debt of the Centre and states,
• Declined by the same percentage from 7% in March 2018 to 68.6% or Rs 1.3 crore crore (Rs 130 trillion)

INTERNAL DEBT & EXTERNAL DEBT

• The government’s finances were largely protected from currency risks as external debt stood at 7% of GDP  or Rs 5.12 lakh crore in FY19.
• On the other hand, 1% of the Centre’s liabilities consisted of domestic debt in FY19.

WHO IS RESPONSIBLE FOR RAISING DEBT?

• The government debt is managed by the country’s central
• The national debt is managed by a bank division, called the Public Debt Office (PDO).

HOW THE DEBT IS RAISED BY?

• The Reserve Bank of India raises debt for the Government of India through a range of instruments,  which the RBI calls “G-Secs”

• The tenure of the longest security was 37 years.
• The average interest cost (AIC) for the Centre remained unchanged over FY18 to FY19 at 1%.
• Primary deficit is the fiscal deficit of current year minus interest payments on previous borrowings.

WHAT SHOULD BE THE IDEAL DEBT TO GDP?

• A study by the World Bank found that countries whose debt-to- GDP ratios exceeds 77% for prolonged periods, experience  significant slowdowns in economic growth.
• Pointedly: every percentage point of debt above this level costs countries 1.7% in economic growth.
• This phenomenon is even more pronounced in emerging markets, where each additional percentage point of debt over 64%,  annually slows growth by 2%.

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