The Comptroller and Auditor General of India (CAG) has released a report stating that India’s debt sustainability was positive in 2022-23, indicating a move towards stability. The debt sustainability analysis revealed that the Debt-GDP ratio, which measures the government’s debt as a percentage of the country’s Gross Domestic Product (GDP), increased from 49.34% in 2018-19 to 61.38% in 2020-21. However, it declined to 57.93% in 2022-23, showing a downward trend.
The report also highlighted that the public debt repayment to public debt receipts improved from 89.75% in 2018-19 to 81.22% in 2022-23, freeing up borrowings for productive expenditure. This indicates that the government is managing its debt effectively and is able to repay its debts without straining its finances.
Another important indicator of the government’s fiscal health is the interest payments to revenue receipts ratio, which measures the proportion of government revenue used to pay interest on debt. This ratio peaked at 38.66% in 2020-21, declined to 33.99% in 2021-22, and increased to 35.35% in 2022-23.
The government has set targets to limit its fiscal deficit to 3% of GDP by March 31, 2021, and to reduce its general government debt to 60% of GDP and central government debt to 40% by the end of 2024-2025. The government has also committed to pursue a path of fiscal consolidation to attain a fiscal deficit lower than 4.5% of GDP by 2025-26.
Debt sustainability is crucial for a country’s economic stability, as it enables the government to meet its current and future debt obligations while still financing essential spending on healthcare, education, and infrastructure. A positive debt sustainability indicator suggests that the government is on the right track in managing its debt and ensuring the country’s economic stability. Overall, the report suggests that India’s debt sustainability is improving, and the government is taking steps to manage its debt and achieve fiscal consolidation.