India’s Debt Dilemma

India’s Debt Dilemma

India was an outlier on fiscal outcomes pre-pandemic, before drifting further in the high debt direction during COVID. High levels of debt limit the resources available for other priorities such as health, education and climate change abatement. At the same time, there is no immediate crisis of debt sustainability: institutional factors limit rollover risk, and interest rates have not risen with additional debt issuance. But financial stability and sustainability risks may arise in the future, and lack of resources to meet pressing needs is a drag on growth. Consolidation would require lower primary deficits achieved through tax revenue generation and privatization, all while protecting and prospectively increasing capital spending. Contingent liabilities pose risks to the public finances of the States and should be minimized by fiscal-management reforms. As their debt manager, the RBI should allow States to face the market interest rates warranted by current and projected debt levels.  Financial Commissions should be strengthened so as to provide stronger incentives for prudence.


  • 8811India’s Debt Dilemma

    Barry Eichengreen is George C. Pardee and Helen N. Pardee Chair and Distinguished Professor of Economics and Professor of Political Science at the University of California, Berkeley, where he has taught since 1987. He is a Research Associate of the National Bureau of Economic Research (Cambridge, Massachusetts) and Research Fellow of the Centre for Economic...   Read More

  • 288India’s Debt Dilemma

    Poonam Gupta is the Director General of National Council of Applied Economic Research (NCAER), India’s largest economic policy think tank, and a member of the Economic Advisory Council to the Prime Minister. Gupta is the founding Director of NCAER’s National Macro and Growth Centre, and editor of its two journals: Margin and Indian Policy Forum. She joined NCAER...   Read More

  • 17885India’s Debt Dilemma

    Ayesha Ahmed is working at NCAER as a Research Analyst. While her interests are eclectic, she is most interested in working on issues related to macro-economics, international trade, public finance, inflation, and monetary policy. She has a Bachelor’s degree in Economics from Miranda House and a Master’s Degree in Economics from the Delhi School of...   Read More