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What Level of Public Debt Could India Target?

  • Petia Topalova
  • Dan Nyberg

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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Paper provided by International Monetary Fund in its series IMF Working Papers with number 10/7.

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Length: 27
Date of creation: 01 Jan 2010
Date of revision:
Handle: RePEc:imf:imfwpa:10/7
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  1. Fabian Valencia & Luc Laeven, 2008. "Systemic Banking Crises: A New Database," IMF Working Papers 08/224, International Monetary Fund.
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  9. Paul R. Krugman, 1988. "Financing vs. Forgiving a Debt Overhang," NBER Working Papers 2486, National Bureau of Economic Research, Inc.
  10. Audrey Desbonnet & Sumudu Kankanamge, 2007. "Public debt and aggregate risk," Documents de travail du Centre d'Economie de la Sorbonne v07042, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
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  14. Roberto Perotti, 1999. "Fiscal Policy In Good Times And Bad," The Quarterly Journal of Economics, MIT Press, vol. 114(4), pages 1399-1436, November.
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