India had done relatively well, Finance Ministry on IMF report

Ira Singh
Khabar Khabaron Ki,23 Dec’23

India has said that certain presumptions in IMF’s latest Article IV consultations with India does not reflect factual position and have been made taking into account possible scenarios.Noting that similar IMF reports for other countries show much higher extreme scenarios for them, the Ministry stressed that any interpretation that the report implies that general government debt would exceed 100% is misconstrued.

The finance ministry has said that a majority of India’s general government debt, which includes those of the Centre and states, is in rupees, and external borrowings make up only a small portion. It pointed out that the rollover risk is low for domestic debt.The finance ministry also pointed out that IMF reports for other countries showed a much higher extreme scenario for them, with the figures being 160% for the US, 140% for the UK and 200% for China.

The IMF report for India also indicates that, under favourable circumstances, the General Government Debt to GDP ratio may decline to below 70 per cent in the same period, the ministry said.The ministry said that shocks like Covid-19 and the Russia-Ukraine war have uniformly impacted the global economy. Despite this, it said, India has done relatively well and is still below the debt level of 2002.In its Article IV consultations with India, the IMF had said that, under adverse shocks, the country’s general government debt could be 100% of debt to GDP ratio by FY 2028. The ministry has clarified that this was mentioned as an extreme possibility like “once-in-a-century Covid-19” and was among various favourable and unfavourable scenarios that were listed. The ministry has emphasised that in that instance, the IMF was talking only of a worst-case scenario and this is not a “fait accompli”.