The International Monetary Fund has very well cautioned India that its government debt may exceed 100% of its GDP, in the medium term. On liability exceeding 100% of the GDP, India argued that risks from the debt are extremely limited as it is chiefly denominated in domestic currency.
It has also been said that long-term debt sustainability risks are high in India as significant investment is needed to meet the country’s goal of subtracting climate change. India’s public debt-to-GDP ratio at the general government level has barely increased from 81% in 2005-06 to 84% in 2021-22, and back to 81% in 2022-23.
Fresh and preferably concessional sources of financing are needed, as well as greater private sector investment and carbon pricing or matching mechanisms. The Union government has thought differently about the recent assessment. Opportunities are abundant for one and all if one just puts one’s mind to it.
Risks to the country’s economic growth outlook are balanced. It raised the medium-term potential growth rate to 6.3% from the earlier estimate of 6% on the foundations of larger-than-expected capital spending and higher jobs. Insisting that there would not be any sort of deterrence in the quest for vitally required information.
Economists point out that a country’s debt is deemed endurable if the government can meet all its current and future payment responsibilities without incredible financial contribution or going into bankruptcy.
It is assumed that a quick global growth slowdown in the near term would affect India through trade and financial channels. Further global supply disruptions could generate recurrent commodity price volatility, increasing fiscal pressures for India.
Domestically, weather shocks could reignite inflationary pressures and prompt further food export restrictions. On the upside, stronger-than-expected consumer demand and private investment would bring up growth. India, however, was calculating a growth rate of 7% to 8%.
Since imported inflation is a crucial element of India’s overall inflation that impacts 1.4 billion people, the central bank has to actively manage the rupee volatility.