NEW DELHI: As India’s debt-to-GDP ratio is set to reach highest in the past two decades, the Economic Survey has suggested that the government give priority to economic growth, and not worry about fiscal deficit because without growth, India will find it difficult to service its debt obligation.
“The Survey endeavours to provide the intellectual anchor for the government to be more relaxed about debt and fiscal spending during a growth slowdown or an economic crisis,” Chief Economic advisor K Subramanian said in the latest economic survey 2019-20, tabled in Parliament on Friday, calling for more active, counter-cyclical fiscal policy.
Dismissing concerns raised by the experts, economists and rating agencies, the survey said higher growth in economy in the past two-and-a-half decades has resulted in lower debt-to-GDP in India because of an increase in the denominator GDP.
“Interest rate on debt paid by the Indian government has been less than India’s growth rate by norm, not by exception,” the Survey noted.
The Survey says simulations undertaken till 2030 highlight that given India’s growth potential, debt sustainability is unlikely to be a problem even in the worst-case scenarios.
The observation comes at a time when the public debt to GDP ratio, which was 66-68%, is expected to jump to 80% plus in 2020-21, which will be the highest in the past two decades.