India's Public Debt: High but Sustainable, Says NCAER Chief

Despite India's public debt nearing 82% of GDP, NCAER Director General Poonam Gupta asserts that it remains sustainable due to the high growth rate and majority of the debt being held in local currency. Gupta also highlighted the debt dynamics among states and called for better fiscal policies.

Despite India's public debt approaching 82% of its GDP, the country does not face immediate concerns regarding debt sustainability, attributed to a robust growth rate and a larger share of debt being held in local currency, according to NCAER Director General Poonam Gupta.

Speaking at an NCAER event, Gupta emphasized that the current levels of debt are manageable, largely due to India's real or nominal GDP growth and that most of the debt is denominated in rupees. States account for one-third of the nation's total debt, with projections suggesting further increases over the next five years.

Gupta pointed out that, ironically, the most indebted states like Punjab and Himachal Pradesh have certain advantages, including longer debt maturity and similar interest rates, compared to less indebted states such as Gujarat.

During a discussion on the fiscal challenges faced by states, M Govinda Rao, Councilor at the Takshashila Institution, highlighted the issue of subsidies being used for electoral gains as a significant contributor to rising state debts. He stressed that a novel approach is required as the Centre oversees the management of debt.

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