Marketable government securities, such as G-secs and T-Bills, are issued through auctions, while non-marketable ones include treasury bills issued to state governments and special securities for the National Small Savings Fund.
What is the size of Public Debt?
The scale of public debt is defined by the government’s fiscal plans, outlined annually in the Budget. According to the finance ministry’s report in March, total gross liabilities increased marginally to Rs 160.69 lakh crore by December 2023 from Rs 157.84 lakh crore in September of the same year. This quarter-on-quarter rise of 1.8% during 2023-24 underscores the ongoing management of public debt.
During the third quarter of the fiscal year, public debt constituted 90% of total gross liabilities, reflecting its significant role in fiscal policy.
Finance minister Nirmala Sitharaman emphasized India’s robust debt management practices, citing a debt-to-GDP ratio of 81% for FY22. To highlight the point, Sitharaman also compared it with other, pointing higher ratios in Japan (260.1%), the US (121.3%), France (111.8%), and the UK (101.9%).
Understanding Debt-to-GDP Ratio
The debt-to-GDP ratio is a critical metric assessing a country’s ability to service its debt. High ratios have historically caused economic crises, such as the European debt crisis, highlighting the importance of prudent fiscal management.
It is crucial to evaluate the nature of government deficits—whether they fund capital assets or non-asset-creating expenditures like subsidies. Capital spending during economic slowdowns can stimulate private investment, fostering economic growth.
What is considered an acceptable level of debt-to-GDP ratio?
The NK Singh Committee on FRBM proposed a debt-to-GDP ratio of 40% for the central government and 20% for states, aiming for a combined general government debt-to-GDP ratio of 60%.
The Role of PDMA
Proposed in the 2015 Budget by Arun Jaitley, the Public Debt Management Agency (PDMA) aims to independently manage government debt, separate from the Reserve Bank of India’s monetary policy functions. Pending its establishment, an interim arrangement, the Public Debt Management Cell, oversees public debt management.
These initiatives underscore the strategic importance of effective public debt management within India’s economic framework.
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( Originally published on Jan 20, 2020 )
