What Level of Public Debt Could India Target?

IMF Working Papers, January 1, 2010

Source details

Discusses possible medium-term public debt targets for India.
Bases analysis on evidence from the economic literature on prudent levels of public debt and feasibility for the country to meet a particular target over the next 5-6 years.
Recognizes challenges in determining an appropriate debt target.

Cross-country analysis and simulations suggest a debt ratio in the range of 60-65 percent of GDP by 2015/16 might be suitable for India.
Such a debt ceiling:
- Remains 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.
- Would send a strong signal of the government's commitment to fiscal consolidation by making a clear break with the past.

Targeting a debt ratio in the range of 60-65 percent of GDP by 2015/16 would:
- Provide fiscal space for countercyclical policy responses.
- Offer capacity to absorb contingent liabilities.
- Reinforce a visible commitment to fiscal consolidation.

Subjects: Emerging and frontier financial markets, Financial markets, Financial services, Fiscal policy, Government debt management, Public debt, Public financial management (PFM), Real interest rates
Keywords: debt, debt ceiling, debt intolerance, debt level, debt ratio, debt target, debt threshold, Emerging and frontier financial markets, fiscal consolidation, Fiscal rules, GDP, GDP + ClubB, GDP + ClubC, GDP deflator, GDP reduction, General government debt, Global, Government debt management, India, public debt debt ratio, Real interest rates, WP

Path of India’s General Government Debt: Scenarios
- Path of India’s General Government Debt: Scenarios (Markdown version)
- Path of India’s General Government Debt: Scenarios (PDF)