The warning from the International Monetary Fund (IMF) that India’s debt could surpass its GDP by FY28 has been met with a response. The country’s fiscal health is demonstrated, according to the Union Finance Ministry, by the fact that total government debt (federal and state) fell from 88% of GDP in 2020–21 to 81% in 2022–23. India is still on track to meet its aim for fiscal consolidation, the ministry said, notwithstanding the IMF’s warning.
IMF’s Worst-Case Scenario: India’s Perspective
The finance ministry explains that the estimate of a 100% debt-to-GDP ratio is an extreme situation, similar to the uncommon occurrence of the COVID-19 Pandemic, in response to the IMF’s concerns expressed during the Article IV consultations. The ministry emphasizes India’s robustness against global shocks, citing historical examples like the global financial crisis and the COVID-19 Pandemic, while accepting numerous possibilities provided by the IMF.
Climate Mitigation and Long-Term Risks
Potential long-term risks for India have been marked up in the International Monetary Fund’s annual report, especially in relation to the significant expenditure needed for climate change mitigation. India, on the other hand, says it is certain it can manage these risks and notes that debt issued domestically, mostly in the form of government bonds, has little exposure to exchange rate fluctuation and little rollover risk.
Interconnectedness of the World Economy
India emphasizes how 21st-century global shocks like the COVID-19 and the global financial crisis have affected people everywhere. India reiterates its commitment to fiscal discipline and smart financial management, remaining alert but resilient against unanticipated global developments.
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