What Level of Public Debt Could India Target?
January 1, 2010
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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.
Subject: 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
Pages:
27
Volume:
2010
DOI:
Issue:
007
Series:
Working Paper No. 2010/007
Stock No:
WPIEA2010007
ISBN:
9781451961836
ISSN:
1018-5941
