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26th December 2023 (10 Topics)

Debt debate


Finance Ministry responds to IMF's Article IV consultations, disputing worst-case scenarios on India's debt, emphasizing global shocks' impact and improvements.

Finance Ministry's Response to IMF Report

  • Context of Statement: Finance Ministry's response to IMF's Article IV consultations with India regarding its economic and financial policies.
  • Concerns Raised by IMF: IMF's view that adverse shocks could raise India's general government debt to or beyond 100% of GDP.
  • Ministry's Clarification: Ministry asserts this is a worst-case scenario, not a certainty; highlights higher extreme scenarios for other countries.

India's Fiscal Position

  • Current Debt Status: Combined central and State government debt at 81% of GDP in 2022-23, down from 88% in 2020-21.
  • IMF's Positive Outlook: Under favorable circumstances, debt could reduce to 70% by 2027-28; IMF's improved perceptions of India's fiscal position.
  • Global Shocks and India's Response: Ministry points out global shocks impacting India; emphasizes the Centre's ability to meet fiscal targets.

Balancing Act

  • Ministry's Clarification Intent: Ministry clarifies its statement as an effort to prevent misinterpretation; not a rebuttal to IMF.
  • India's Director on IMF Board: Recorded reservations about staff conclusions; fiscal space risks deemed moderate.
  • Government's Critical Role: Reducing debt, maintaining fiscal deficit targets crucial; actions speak louder than words in fiscal management.
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