Sharp, post-pandemic fiscal correction yields results
India’s general government debt moderated to 80.9% of the Gross Domestic Product (GDP) in 2022-23 from 83.3% in 2021-22, minister of state for finance Pankaj Chaudhary told Rajya Sabha on Tuesday.
The general government debt, which comprises the debts of the centre and states, had soared to 87.8% in FY21, the highest in at least four decades, as government expenditure rose during the Covid-19 pandemic, amid revenue slump.
The concerted effort by the Centre and States to limit borrowing helped them bring down the fiscal deficit and debt level from FY22 onward. The Centre’s fiscal deficit which hit 9.2% of GDP in FY21, the highest in the last four decades, was brought down to 6.7% in FY22 and further to 6.4% in FY23.
Aided by buoyancy in revenues, the Centre managed to cut its fiscal deficit even after bringing Rs5 trillion or 75% of off-Budget liabilities of close to Rs 6.7 trillion, into the balance sheet by FY22.
With the fiscal deficit likely at 2.6% in FY23, the states have also rebounded to the pre-pandemic level aided by buoyant revenue collections and prudent expenditure management. However, many states pruned their capex plans to keep the fiscal deficit below 3% of their GSDP. The combined fiscal deficit of states had shot up to 4.1% of GDP in FY21 from 2.6% in FY20.
High public debt means a substantial chunk of government resources are used annually to pay interest to bondholders. The Centre’s expenditure on interest payments rose to Rs9.28 trillion(27% of revenue expenditure) in FY23 from Rs 5.83 trillion (29% of revenue expenditure) in FY19.
According to IMF’s Fiscal Monitor report in April, public debt as a ratio to GDP has soared across the world during Covid-19. In 2020, the global average of this ratio approached 100%, and it is expected to remain above pre-pandemic levels for about half of the world, it said.
Source:financialexpress.com