Government’s Total Debt Crosses ₹156 Lakh Crore by March 2023; Up 11% from Previous Year
The Central government’s total debt has reached ₹156 lakh crore by the end of 2022-23, showcasing a growth of 11.5% compared to the previous year, as per government data. This rise in government debt represents an increase of nearly 5% from what it was on December 31, 2022.
Out of the total gross liabilities of the Central government, 95.2% were denominated in domestic currency, while 4.8% constituted sovereign external debt. At the end of March 2023, the external debt of the Central government stood at ₹7.5 lakh crore, considering the current exchange rate.
The Central government’s total debt consists of three major components: internal debt, external debt, and other liabilities such as small savings deposits and state provident funds. With a ratio of around 57%, the Central government’s debt-to-GDP ratio stands at ₹156 lakh crore, which is lower than the 59% recorded in the previous financial year. After a peak of 60% in 2020-21, the proportion of the central government’s debt has begun to decline.
A few years ago, concerns were raised when the government debt (Central as well as state governments) neared 90% in 2020-21. However, after two years of consistent decline in debt relative to GDP, analysts now believe that the country’s debt burden is at a manageable level.
Moody’s, a rating agency, recently stated in a report that India’s rapidly growing GDP is a key factor driving their projections of a downward trend in the country’s debt burden. The report mentioned that the favorable gap, created against the average interest rate on debt, enables the persistence of fiscal deficits without significantly increasing the debt burden. The report further emphasizes that debt affordability and the proportion of revenue utilized for interest payments are crucial factors affecting fiscal strength and the credit profile.
Currently, the central government spends 26% of its total revenue on interest payments. Moody’s notes that this proportion is relatively high and could pose a constraint on the government’s ability to provide additional support for growth and address developmental needs, if not addressed by expanding the revenue base.
In conclusion, the Central government’s total debt has witnessed a significant increase, reaching ₹156 lakh crore by March 2023. Although concerns about the country’s debt burden have eased, sustaining India’s economic growth and efficiently managing fiscal affairs remain essential for maintaining a favorable debt-to-GDP ratio and ensuring manageable debt levels.
Note: The author of this article does not hold any opinions or biases favoring any specific perspective. The purpose of this article is to present information based on the provided news and data.
