Finance minister Nirmala Sitharaman said on Friday that the government is looking at reducing its debt burden further and has already resorted to prudent spending by resisting the temptation of fiscal profligacy, especially after the pandemic, to avoid burdening future generations.
In her inaugural speech at the Kautilya Economic Conclave 2023 in the capital, a few months ahead of the interim Budget for FY25, she said: “For every decision that we take today, we are conscious of what burden it is going to leave to the next generation. It’s very easy to be profligate.”
The Centre aims to bring down its fiscal deficit to 4.5% of GDP by FY26 from the budgeted 5.9% for FY24.
The global economy, she said, is bearing the brunt of simultaneous wars in places that can severely affect supply chains.
The Israel-Hamas war has already stoked fresh uncertainties about the global supply chains – especially of food and energy – already hit by the Ukraine war and the pandemic.
Debt-to-GDP ratio
In such critical junctures, however, the decades-old multilateral institutions have become less effective, Sitharaman said, highlighting the urgent need for reforming them.
As for the government’s debt policy, she said: “We are conscious of the debt of the government. Compared to many other countries, it might not be as high but even then, we are consciously looking at experiments in different parts of the world (as to how to reduce the debt level),” the minister added.
The pandemic spending and the contraction in the Indian economy exacerbated the combined debt-to-GDP ratio of the Centre and the states to 89.2% in FY21 from 75.1% in the previous year. It stands at a high level of 81.9% now, almost similar to China’s 83%, but the country’s debt profile doesn’t face the same heightened risks as that of the world’s second-largest economy, according to the International Monetary Fund (IMF).
The NK Singh panel had, in 2017, recommended cut in the combined debt ratio to 60% by FY23.
Exuding confidence that her government will succeed in its endeavour to reduce debt, Sitharaman also dwelt on “the need to be sure that money that is being spent gives its right returns”, keeping with the “bang for the buck” concept. “Our efforts are very well streamlined to meet India’s aspirational requirement, but (we) deal with it with a sense of responsibility so that our coming generations don’t feel the burden that the government will have left on them,” the minister said.
That’s why the government resorted to spending public money to create public infrastructure, “so that we have better returns for every rupee spent”. While doing so, the government has avoided “the temptation being periodically thrown at us” to give money in the hands of people to spur private consumption and stir growth, she indicated.
Sitharaman said the Jan-Dhan Yojana, launched in 2014, has turned out to be the most crucial instrument in bringing financial inclusion in the country. Benefits under more than 50 government schemes are being directly transferred into the beneficiaries’ bank accounts, and the combined balance in these accounts well exceeds Rs 2 lakh crore, she added.
The minister highlighted the challenges posed by global terror and said it’s no longer confined to any single country or region and that global investors are increasingly starting to factor in risks to businesses from this menace.
