India ahead of China in debt risk management

Washington: India has a high debt like that of China, but the risks associated with it are not as great as that of its northern neighbour, a senior official from the International Monetary Fund (IMF) said, advising India in the medium term to have an ambitious fiscal consolidation plan that brings down deficits.

“The current debt in India is also high. It stands at 81.9 per cent of GDP. Compared to China, which is 83 per cent, it is very similar. Also, when we compare India’s debt to the pre-pandemic level in 2019, it was 75 per cent. Soit is still quite a bit higher,” Ruud de Mooij, Deputy Director, Fiscal Affairs Department at International Monetary Fund, told PTI in an interview. “What we also see in India is a deficit that is 8.8 per cent projected for 2023. In India, a large portion of this is because of expenditures on interest. They pay a lot of interest on their debt: 5.4 per cent of GDP is spent on that, and the primary deficit is 3.4 per cent. So together they add up to 8.8 per cent,” he said.

Responding to a question, Mooij said that India’s debt is not projected to rise like in China. It, in fact, is projected to fall slightly by 1.5 per cent to 80.4 per cent in 2028. One of the reasons is that growth in India is much higher. India is one of the countries with really high growth. This matters of course for the debt to GDP ratio. Also, just to note that the risks are moderated by some factors, he said.