HPEC asks govt to cut total public debt
The high powered expert committee (HPEC) to advise the government on developing Mumbai as an international financial centre (IFC) has recommended the need for a progressive reduction of the total public debt to GDP ratio to a ‘significantly’ lower...
By TNN |
NEW DELHI: The high powered expert committee (HPEC) to advise the government on developing Mumbai as an international financial centre (IFC) has recommended the need for a progressive reduction of the total public debt to GDP ratio to a ‘significantly’ lower level from the current 80%. Though no particular ceiling for the debt-GDP has been identified, a ratio of 50-65% has been recommended.
Total public debt in this context has been defined as the outstanding long and short term debt of central and states governments, as well as the debts of PSUs guaranteed by the government and all contingent liabilities of central and state governments incurred through off-balance sheet financing or quasi fiscal accounts.
The HPEC has noted that “an IFC in Mumbai would become credible and successful more quickly if India’s overall economic strategy was aimed at achieving and maintaining an average growth rate of 9% to 10% between now and 2025.” The panel has called for a reduction of the over-dependence on the domestic financial market in financing the fiscal deficit. “Public debt should be financed in domestic and global bond markets,” the report says.
Overseas financial markets can finance the public deficit by buying Indian rupee (INR) denominated government bonds. In this context, it has been recommended that the purchase of INR denominated instruments issued by the government be made open to anyone across the maturity spectrum of 7 days to 30 years.
Further, in a bid to assist state governments, metropolitan municipal corporations and other local authorities to resort to market financing and reduce dependence on the central government for financial guarantees, the committee has suggested a restructuring of the Budgets and balance sheets of these authorities. The panel has also favoured the public-private-partnership mode for developing the infrastructure sector to shift the burden of future infrastructure investment from the public domain to the private sector.
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The committee has called for faster progress to establish “the fiscal foundations of a rapidly growing—but still ‘developing’—economy in which a newcomer IFC must operate credibly.” A reduction of the gross consolidated fiscal deficit to 4-5% of GDP has been emphasised.Download
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