Topic: India’s government debt is high according to rating agencies – the country has a low fiscal space. For the government, the Finance Secretary retaliated that India’s government debt level is less than that of several developed countries.

  • International rating agency Fitch stated that India has the highest general government debt ratio of any ‘BBB’-rated emerging markets.
  • “From a ratings perspective, we see India as having limited fiscal space as it has the highest general government debt ratio of any ‘BBB’-rated emerging market sovereign at just under 90% of GDP,” Jeremy Zook, Director and Primary Sovereign analyst, India for Fitch Ratings said in a note earlier.
  • India’s Finance Secretary TV Somanathan retaliated by pointing out that several developed countries have higher debt-GDP ratio than India.
  • He accused that the rating agencies have double standards.

According to the IMF data, the government debt (Central government plus state government debt as a % of GDP is 89% for India in 2020). India’s debt level is lower than that of several advanced countries including the US, UK, France, Italy etc. Compared to several developed countries, India’s debt level is low and hence the country can not be termed risky given the level of Governmental Debt. Still, it is higher than that of China. A consolation of India’s debt scenario is that nearly 98% of government debt is in the form of internal debt. Low proportion of external debt is a significant benefit for the country as it will avoid the tough situation of servicing in foreign currencies. At the same time, the rising yield level in early 2022 is a matter of concern for the country. This indicates that the cost of borrowing for the government goes up and hence the future interest payment bill will increase.



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