Reducing debt burden necessary to create fiscal space for investment in priority areas: RBI Guv Das

Kolkata: The fiscal consolidation path adopted by India along with the country growth prospects, the general government debt is likely to gradually come down while elevated level of public debt in many advanced economies is raising concerns on macroeconomic stability.

"The challenges of debt sustainability in an environment of high interest rates and low growth at the global level can become new sources of stress. Reducing debt burdens is necessary to create fiscal space for new investments in priority areas, including green transition," Reserve Bank of India Governor Shaktikanta Das said.

"As regards India, given the fiscal consolidation path as well as improving growth prospects, we expect the general government debt to gradually come down," he said.


According to International Monetary Fund, India's government debt eased to 81% of GDP in 2022 and is projected to decline to 80.5% in 2028 as compared with 88.5% during the pandemic year 2020. India’s external debt to GDP ratio fell to 18.6% at the end of September 2023 from 20% at end-March 2022. The debt service ratio rose to 6.7% from 5.2% during the same period.

The foreign exchange reserves at $616.7 billion cover more than 10 months of projected imports for 2023-24 and about 97% of total external debt.

In comparison, the gross public debt to GDP ratio of advanced economies is projected to rise to 112.1% in 2023 increase from 104.1% in 2019 . For emerging market economies, the gross public debt to GDP ratio is estimated to increase to 68.3% in 2023 from 55.9% in 2019.

"Amidst the current headwinds, elevated level of public debt is raising serious concerns on macroeconomic stability in many countries, including some of the advanced economies," Das said.