As a follow up of the announcement made by the Finance Minister in his Budget Speech 2010-11, a comprehensive Paper on Government Debt has been released by the Finance Ministry, today. The Paper titled “Government Debt – Status and Road Ahead” gives the current debt and liability situation of the Government and also critically analyses the connected statistical information. The concept of ‘adjusted debt’ of Government has been introduced after factoring in the impact of external debt at current change rate and netting out Market Stabilization Scheme and NSSF liabilities not used for financing Central Government deficit. While analyzing the general Government debt (consolidated debt for Central and State Governments), 14 days T-bills investment by States and Central loans to State Governments have also been netted out to avoid double accounting.
The Paper also presents a road map for general Government debt for the period 2010-11 to 2014-15 covering the award period of 13th Finance Commission. There is no deviation from the commitments on fiscal consolidation enumerated in the Medium Term Fiscal Policy Statement 2010-11. This road map is worked out on the basis of separate debt targets for the Centre and the States during this period.
The proposed road map shows a reduction of 8.1% of GDP in the consolidated debt for general Government during five year period from 2010-11 to 2014-15. In the terminal year (2014-15) the targeted debt of general Government is 64.9% of the GDP as against 68% recommended by the 13th Finance Commission.
The current level of general Government debt at 73% of GDP and the proposed debt levels indicated in the road map are considered sustainable keeping in mind the long maturity profile of existing Government debt, lower proportion of external debt, high percentage of fixed rate debt, higher rate of domestic savings as proportion of GDP and likely growth of GDP in coming years. In all these parameters, India is better placed than most of the other developed and developing economies of the world.