Finance Ministry Disputes IMF's Forecast Of Debt Exceeding 100% GDP By FY28

India rebutted the International Monetary Fund's forecast of its government debt surpassing 100 per cent of GDP by 2027-28, calling it a misunderstanding. The finance ministry pointed out that compared to other nations like the USA, UK and China, India's anticipated debt ratio is relatively better at 100 per cent, with these countries projecting figures around 160, 140 and 200 per cent, respectively.

The ministry clarified that the IMF report, following its annual consultation with Indian authorities, doesn't necessarily imply India's debt crossing 100 per cent of GDP in the medium term. It emphasised the significant decline in general government debt, including both state and center, from approximately 88 per cent in FY 2020-21 to about 81 per cent in 2022-23. 

The ministry also highlighted the fiscal consolidation target to reduce the fiscal deficit below 4.5 per cent of GDP by FY 2025-26, affirming the states' enactment of fiscal responsibility legislation as a positive indicator for debt reduction.

Addressing the IMF's concerns about elevated public debt, the ministry underscored that India's debt is primarily in rupees, with minimal contributions from external borrowings. It highlighted the IMF's acknowledgment of domestically issued debt, mostly in government bonds, with a weighted average maturity of around 12 years, resulting in low rollover risk and limited exposure to exchange rate volatility.

In response to the IMF's suggestions for revenue and expenditure measures, including GST and subsidy reforms, the ministry defended India's position by emphasising its efforts to prioritise public investment and targeted support for vulnerable sectors while maintaining fiscal discipline.