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RBI Governor- Shaktikanta Das

Amidst the current headwinds, elevated level of public debt is raising serious concerns on macroeconomic stability in many countries, including some of the advanced economies (AEs), said said RBI Governor Shaktikanta Das while announcing the decisions of RBI MPC meet 2024 on Thursday.

He highlighted that the global public debt to GDP ratio is projected to reach 100 per cent by the end of this decade.

“The public debt levels in AEs are in fact much higher than those in the emerging market economies (EMEs). The challenges of debt sustainability in an environment of high interest rates and low growth at the global level can become new sources of stress,” he said.

According to the IMF, the gross public debt to GDP ratio of AEs is projected to increase from 104.1 per cent in 2019 to 112.1 per cent in 2023. For EMEs, the gross public debt to GDP ratio is estimated to increase from 55.9 per cent in 2019 to 68.3 per cent in 2023.

According to the governor, reducing debt burdens is necessary to create fiscal space for new investments in priority areas, including green transition.

As regards India, given the fiscal consolidation path as well as improving growth prospects, the central bank expects the general government debt to gradually come down.

According to the IMF Fiscal Monitor of October 2023, the general government debt of India increased to 88.5 per cent of GDP during the pandemic year 2020. This has come down to 81 per cent of GDP in 2022 and is projected to decline to 80.5 per cent in 2028.

Read More: Top 10 announcements of RBI MPC meet 2024

The Foreign exchange Reserves cover more than ten months of projected imports for 2023-24 and 97.1 per cent of total external debt as on end-September 2023, it added.

The data further highlighted that India’s external debt/GDP ratio fell from 20.0 per cent at end-March 2022 to 18.6 per cent at end September 2023. The debt service ratio increased from 5.2 per cent to 6.7 per cent during the same period.

Domestic economic activity remains strong

The first advance estimates (FAE) placed the real gross domestic product (GDP) growth at 7.3 per cent for 2023-24, marking the third successive year of growth above 7 per cent. Going forward, the momentum of economic activity witnessed during 2023-24 is expected to continue in the next year (2024-25), the Governor pointed out.

  • Published On Feb 8, 2024 at 12:06 PM IST

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