In Today’s News:
- India’s Public Debt ratio to increase to 90% of GDP.
1. India’s Public Debt ratio to increase to 90% of GDP
India’s Public Debt ratio which remained stable at 70% of GDP since 1991 is projected to increase to 90% of GDP due to increased public spending on account of COVID-19. Vitor Gaspar, Director of IMF’s Fiscal Affairs Department said that the increase in public spending, in response to COVID-19, and the fall in tax revenue and economic activity, will make public debt jump by 17 percentage points to almost 90% of GDP.
Prelims GS – Economic Development
- The debt-to-GDP ratio is the measure of comparing a country’s public debt to its gross domestic product (GDP).
- Public debt includes the total liabilities of the Union government that have to be paid from the Consolidated Fund of India.
- Public Debt is sometimes also used to refer to the overall liabilities of the central and state governments
- The higher a country’s debt-to-GDP ratio climbs, the higher its risk of default becomes.
- Though governments strive to lower their debt-to-GDP ratios, this can be difficult to achieve during periods of unrest, such as wartime, or economic recession.
- During such challenging times, governments tend to increase borrowing in an effort to stimulate growth and boost aggregate demand.
- India’s Public Debt ratio remained stable at 70% of GDP since 1991. (Note: Remember such key facts of the Indian economy. )
- As said above, due to COVID-19 which is a challenging situation, the current projection of India’s Public Debt Ratio is projected to increase to 90% of GDP.
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