Govt debt likely to breach 90% of GDP this year, says IMF report

Last Updated on December 25, 2022 by Admin

[ad_1]



The International Monetary Fund (IMF) has projected the government debt, including that of the Centre and the states, to rise to a record 90.6 per cent of gross domestic product (GDP) during 2021-22 against 89.6 per cent in the previous year. It will then moderate to 88.8 per cent during FY23, but will remain over 85 per cent during the next five years — till 2026-27, the IMF said in its latest Fiscal Monitor.


Before Covid-19 hit the country, the remained less than 80 per cent in the recent past. For instance, it was 74.1 per cent during FY20, 70.4 per cent in the previous year, 69.7 per cent in FY18 and 68.9 per cent in the year before that.


While upgrading the outlook on India’s sovereign rating to stable from negative, Moody’s Investors Service recently counted high general government debt, low debt affordability among other para­meters as principal credit challenges for the economy.


chart


The Centre’s debt was at 58.8 per cent of in FY21. It fell slightly to 57.6 per cent in the first quarter of FY22.


One positive development is the Centre including GST compensation to states in its calendar for overall borrowing, which was kept unchanged at Rs 5.03 trillion in the second half of FY22 even after incorporating borrowings for GST compensation to the states.








After its February Budget announcement of Rs 12.05 trillion of gross market borrowing, the government in May said it may have to borrow an additional Rs 1.58 trillion from the market to meet the GST compensation shortfall.


However, market borrowings constitute a small fraction of the Centre’s total debt. For instance, it accounted for 6.1 per cent of total debt during Q1FY22.


IMF also projected India’s fiscal deficit, of both the Centre and the states, to remain in double digits in FY22 even as it would moderate to 11.3 per cent of GDP, from 12.8 per cent in the previous year.


According to the Fiscal Monitor, the deficit will remain above the pre-Covid levels in the next five years. It is likely to be at 7.8 per cent in 2026-27. The gap between the expenditure and revenues of the governments was at 7.4 per cent during FY20.


It should be noted that the IMF’s methodology to calculate fiscal deficit is slightly different than India’s. For instance, it does not include disinvestment proceeds and licence-auction revenues in the government receipts.

mail Dear Reader,

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.

We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor



[ad_2]

Source link