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What Level of Public Debt Could India Target?

Author/Editor: Topalova, Petia | Nyberg, Dan
Authorized for Distribution: January 1, 2010
Electronic Access: Free Full Text (PDF file size is 1,130KB)
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.

Summary: This paper discusses possible medium-term public debt targets for India, based on evidence from the economic literature on prudent levels of public debt and the feasibility for the country to meet a particular target over the next 5-6 years. While recognizing the challenges in determining an appropriate debt target, cross-country analysis and simulations suggest that a debt ratio in the range of 60-65 percent of GDP by 2015/16 might be suitable for India. Such a debt ceiling, while still above the average debt level for emerging markets, is within the range of debt ratios that would provide room for countercyclical fiscal policy and contingent liabilities. It would also send a strong signal of the government's commitment to fiscal consolidation by making a clear break with the past.
 
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Series: Working Paper No. 10/7
Subject(s): Fiscal consolidation | Debt management | Debt sustainability | Public debt | Risk management
Author's keyword(s): Fiscal rules | debt target | fiscal consolidation
 
English  
    Published:   January 1, 2010        
    ISBN/ISSN:   9781451961836   Format:   Paper
    Stock No:   WPIEA2010007   Pages:   70
    Price:   US$18.00
       
     
Please address any questions about this title to publications@imf.org.