NEW DELHI: The Central government’s total debt (provisional) by the end of 2022-23 crossed Rs 156 lakh crore, registering a growth of 11.5% over the previous year, government data showed. The government’s debt rose almost 5% from what it was on 31 December 2022.
Of the Central Government's total gross liabilities in end-March 2023, 95.2% were denominated in domestic currency while sovereign external debt constituted 4.8%. The external debt of the Central government at the end of March 2023 stood at R7.5 lakh crore (at the current exchange rate).
The Central government’s total debt comprises three large components – internal debt, external debt and other liabilities comprising small savings deposits, state provident funds, etc. At 156 lakh crore, the Central government’s debt/GDP ratio is around 57%, which is lower than 59% in the previous financial year. The central government’s debt as a proportion has started falling after rising to 60% in 2020-21.
There were concerns raised a couple of years ago when government debt (Central as well as state governments) was hovering around 90% in 2020-21, but after two years of decline in debt as a proportion to GDP, analysts feel the country’s debt burdens are at a manageable level.
In a recent note, rating agency Moody’s has said that India’s fast-growing GDP (which it assumes to average 11% in nominal terms) is a key driver of our projections of a downward trend in its debt burden.
“Given the favourable gap it creates against the average interest rate on debt, it enables the persistence of fiscal deficits with a contained debt burden. As in the past, the key determinant of fiscal strength and the credit profile will be debt affordability and in particular the proportion of revenue absorbed by interest payments,” Moody’s said in the report.
The central government spends 26% of total revenue on interest payments. The Moody’s report further says that at 26% currently, it is a large proportion (interest payment as a proportion to revenue), which, if not further addressed through a continued broadening of the revenue base, will remain an important constraint on the government’s ability to provide more support for growth and address developmental needs.