As fiscal policies come under scrutiny in the build up to the 2024 general elections, Union Finance Minister Nirmala Sitharaman has pointed out that India’s government debt portfolio stands out as one of the most prudent and least risky in the world. In a recent social media post, Sitharaman highlighted how the risk profile of India’s debt is significantly lower than major economies when assessed against key metrics like debt-to-GDP ratio.
With the economy recovering strongly from the pandemic shocks, Sitharaman claimed that the current government has managed public finances far more efficiently than the previous UPA regime, despite facing unprecedented challenges from COVID-19. She questioned the plausible costs and sustainability of some of the populist schemes promised in the Congress manifesto.
According to the Finance Minister, India recorded a debt-GDP ratio of a modest 81% in 2022, much lower than nations like Japan, Italy, USA, France and the UK, whose debt burdens exceeded 100% of GDP. Sitharaman further noted that nearly 95% of India’s debt is denominated in rupees, insulating it from volatility in foreign exchange rates. Prior to the pandemic, the Modi government had steadily lowered the fiscal deficit and debt ratios through prudent spending and fiscal consolidation.
While COVID-19 forced a temporary surge in deficits and borrowing, the government is claimed to have steadied the ship post-pandemic, bringing the fiscal deficit down to around 5.8% of GDP as per RE for FY24 estimates. Sitharaman asserted that these metrics underscore India’s standing as one of the safest debt risk profiles globally, boding well for future economic resilience and policy flexibility. As political rhetoric on populist freebies heats up, the finance minister’s defense of the current regime’s fiscal record will surely feature prominently in the electoral discourse.
