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Public debt in India: Moving towards a prudent level?

Author

Listed:
  • Isabelle Joumard

    (OECD)

  • Peter Hoeller

    (OECD)

  • Jean-Marc Fournier

    (OECD)

  • Hermes Morgavi

    (OECD)

Abstract

In relation to GDP, India's public debt and interest payments are high compared with most other emerging economies and rating agencies have put India's sovereign debt at the lowest investment grade. On the other hand, India benefits from strong economic growth and needs to increase spending on social and physical infrastructure to support economic growth and to meet the needs of its fast-growing population. This paper assesses recent fiscal developments in India, discusses the threshold beyond which debt has adverse effects on the economy, quantifies the uncertainties surrounding key macroeconomic variables and the risks of overshooting the debt threshold to define a "prudent" debt level. It also provides a debt sustainability analysis. It concludes that under a "no-policy change" scenario, the debt-to-GDP ratio will decline gradually to close to the "prudent" level by 2040. However, adverse shocks could derail this benign scenario.

Suggested Citation

  • Isabelle Joumard & Peter Hoeller & Jean-Marc Fournier & Hermes Morgavi, 2017. "Public debt in India: Moving towards a prudent level?," OECD Economics Department Working Papers 1400, OECD Publishing.
  • Handle: RePEc:oec:ecoaaa:1400-en
    DOI: 10.1787/853c014a-en
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    References listed on IDEAS

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    Cited by:

    1. Isabelle Joumard & Alastair Thomas & Hermes Morgavi, 2017. "Making income and property taxes more growth-friendly and redistributive in India," OECD Economics Department Working Papers 1389, OECD Publishing.

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    More about this item

    Keywords

    fiscal policy; India; prudent debt; public finance sustainability;

    JEL classification:

    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
    • H68 - Public Economics - - National Budget, Deficit, and Debt - - - Forecasts of Budgets, Deficits, and Debt

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