IMF: India’s Debt to GDP increased to 90%

The International Monetary Fund recently announced that the debt to GDP ratio of India increased from 74% to 90% due to COVID-19 crisis. This is to increase to 99% in 2021. The international financial organisation has also stated that this is to reduce to 80% after economic recovery.

What is Debt to GDP ratio?

The Debt to GDP ratio is the ratio between the debt of the Government measured in the units of its currency to the GDP measured in the same unit. When the Debt to GDP ratio is low, it means that the country produces and sells goods and services that are sufficient to pay back debts without incurring further debts.

The Debt to GDP ratio of India has remained 70% since 1991. The current increase is mainly due to COVID-19 crisis.

Debt to GDP ratio of other countries

  • At the end of third quarter of 2020, the Debt to GDP ratio of USA was 127.3%.
  • During the same period, it was:
    • 246.1% in Japan
    • 46.7% in China

What is Public Debt?

The Public Debt in India is the total liability of the Union Government that must be paid from the Consolidated Fund of India. Almost one-fourth of the government expenditure goes into the interest payment.

Public Debt Management Agency

It was established in 2016 by the Ministry of Finance. The Public Debt Management Agency streamlines the borrowings of the Government and helps in achieving better cash management. It was an interim arrangement in the RBI itself. However, it was provided a separate statutory status from that of RBI.

The PDMA plans government borrowings. It manages the liabilities of the Government. It monitors cash balances and improves forecasting of cash. The agency will work towards enhancing the liquidity and efficiency of the market.

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