The IMF Report On India has raised concerns about the long-term sustainability of India’s debts. It cautioned that general government debt is likely to exceed 100 percent of India’s gross domestic product (GDP) in near future. Business Standard reported. The need for significant investment towards climate change targets was also in focus
The IMF Report On India:
“India’s general government debt, which includes federal and state government debt, could be 100% of GDP under adverse circumstances by fiscal 2028” as per the IMF
India has rebuffed the International Monetary Fund’s (IMF) projection that the nation’s government debt could surpass 100 percent of its GDP by 2027-28, calling it “Misconstrued”, PTI reported. The finance ministry in a statement clarified that the debt situation in India isn’t as alarming as projected and highlighted several points to substantiate its stance.
India’s debt to GDP ratio, which was 81% in 2022/23, may decline to below 70% in the same period under favorable circumstances, the IMF report also said, according to the ministry.
“Therefore, any interpretation that the report implies that General Government debt would exceed 100% of GDP in the medium term is misconstrued,” the ministry added
However, the Indian government has contested these warnings, stating that risks associated with sovereign debt are notably limited as it is mainly in domestic currency. KV Subramanian, India’s executive director at the IMF, expressed disagreement with the IMF’s projections in the same report, citing historical shocks experienced by India and emphasizing the limited increase in the public debt-to-GDP ratio
IMF also reclassified India’s exchange rate regime, terming it a “stabilized arrangement” instead of “floating”. This change was met with opposition from the Indian side, dismissing it as “unjustified” and based on “subjective selection”.
While the IMF highlighted concerns over Foreign Exchange Intervention (FXI) impacting the rupee-USD exchange rate, the Reserve Bank of India (RBI) strongly disagreed, asserting that their interventions were necessary to curb excessive volatility. Subramanian also argued against the IMF’s characterization, insisting on the continued importance of exchange rate flexibility in absorbing external shocks
IMF doesn’t understand India’s domestic compulsions. Since imported inflation is a crucial element of India’s overall inflation that impacts 1.4 billion people, the central bank has to actively manage the rupee volatility,” a government official told the paper.
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