Centre refutes IMF’s debt warning, recalls ‘far worse’ conditions of US, China

The Indian government’s debt-to-GDP ratio projection by the International Monetary Fund (IMF) exceeding 100% by 2027-28 is “misconstrued”, the Union finance ministry said while adding that the predictions by the UN’s financial body correspond to a worst-case scenario which is not a “fait accompli”, or not something that cannot be revived.

In its so-called annual Article IV review, the IMF predicted that India’s general debt would exceed 100% of its GDP under adverse circumstances by fiscal 2028.

Referring to the same report that predicts the debt-to-GDP ratio for the US, the UK and China, which stand at 160%, 140% and 200%, respectively, under worst-case conditions, the ministry said their situation is far worse compared to 100% for India.

“It is also noteworthy that the same report indicates that under favourable circumstances, the general government debt to GDP ratio may decline to below 70 per cent in the same period,” the ministry said in a statement.

The government also said the country’s general debt is overwhelmingly rupee-dominated with minimal bilateral or multilateral borrowings from external sources. “Domestically issued debt, largely in the form of government bonds, is mostly medium or long-term with a weighted average maturity of roughly 12 years for central government debt. Therefore, the rollover risk is low for domestic debt, and the exposure to volatility in exchange rates tends to be on the lower end,” the ministry said.

The ministry also pointed out that the general government debt, which includes both states and the Centre, has come down to 81% in the 2022-23 financial year from 88% in the 2020-21 FY.

“The states have also individually enacted their fiscal responsibility legislation, which is monitored by their respective state legislatures,” the statement added.