Bringing down India’s debt to GDP ratio will be the core priority for the government from the next fiscal year, finance minister Nirmala Sitharaman said on Wednesday, while calling upon the states to implement the same.
Speaking at an event in New Delhi, the FM stressed on the need for fiscal management in managing the nation’s finances. “The central government has set clear goals for transparency in budget-making, ensuring that fiscal management is visible to all and meets the highest standards of accountability. As a result, we have been able to bring down the debt-to-GDP ratio since the post-Covid period, when it had crossed 60 per cent. It is now on a declining path,” Sitharaman said.
India’s debt-to-GDP shot up to 61.4 per cent post Covid, before gradually sliding down to 57.1 per cent by 2023-24. The government expects it to reduce to 56.1 per cent this year.
Sitharaman also called upon states to take up accountability and transparency in fiscal management as a priority just like the central government, which has every year reduced the debt levels.
“Unless the debt-to-GSDP is managed better and kept within the FRBM limits and the stock of debt which is being accumulating over the years with high rate of interest which many states are unable to service, unless even those are brought down, you will be borrowing to service the loans, you will not be borrowing for developmental expenditure. That’s a poor play in the fiscal terrain,” Sitharaman said.
While the FM did not name any state, Bengal is often cited as one of the heavily indebted states. Chief minister Mamata Banerjee, however, on Thursday said that whatever debt the state can take is within FRBM (Fiscal Responsibility and Budget Management) limits.
“Those who are saying that the state is taking on debt, don’t they know that there is FRBM system in Bengal?” Banerjee said.
Earlier on Wednesday, the leader of the Opposition in the Bengal Assembly, Suvendu Adhikari, had said Bengal’s internal debt has reached staggering heights, and setting up large industries is the only solution to uplift the state.
Trade weaponised
Sitharaman said global trade is increasingly “getting weaponised” through tariffs and other measures, and India will have to negotiate its way carefully. She said that the overall strength of the economy will give the country an added advantage going forward.
“India can be lectured saying you (India) are very inward-looking, you are a tariff king and so on. But tariff has been weaponised,” the FM said, adding India’s intention was never to weaponise tariffs.