India’s Debt-To-GDP Ratio To Ease By Nearly 10% In 10 Years: CareEdge Ratings
India's general government debt is expected to moderate steadily over the next decade, declining from the current 81 per cent of GDP to about 77 per cent by FY31 and further to 71 per cent by FY35, according to a report released by CareEdge Ratings.
The report highlighted that amid the global landscape of rising government debt, India is projected to follow a path of fiscal consolidation, supported by sustained GDP growth and prudent fiscal management by the Centre.
"Amid the global landscape of rising government debt, we project India's general government debt to moderate from the currently estimated 81 per cent of GDP to about 77 per cent by FY31 and further to 71 per cent by FY35," the report said.
It further noted that the Centre's fiscal consolidation efforts and the sustenance of GDP growth momentum at around 6.5 per cent are expected to support the country's medium-term debt consolidation.
The continuous focus on economic expansion and revenue generation, along with improved fiscal discipline, is seen as a key factor driving the expected decline in debt levels.
However, the report also cautioned that the aggregate state debt continues to remain high and poses a risk to overall fiscal health.
"The sticky aggregate state debt amid the distribution of freebies by some states remains a monitorable going forward," it added.
The report emphasised that while India's overall government debt is projected to moderate, elevated interest payments as a percentage of revenue receipts are expected to remain a challenge for fiscal management.
On a broader regional perspective, the report also observed that the future debt trajectory for economies across the Asia-Pacific (APAC) region is likely to be divergent.
The report mentioned that easing inflation across the APAC region is expected to provide flexibility on the monetary policy front.
"With inflation moderating and policy rates retreating from their peaks, most APAC economies have greater monetary policy space to manage uncertainties," it stated.
Overall, the report noted that India's prudent fiscal approach and steady economic growth provide a favourable outlook for debt consolidation, though careful monitoring of state-level fiscal trends and interest payment obligations remains crucial.
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