Moody’s Investors Service on Thursday, June 15, said the key determinant of India’s fiscal strength and the credit profile will be debt affordability and projected a downward trend for the debt burden. “As long as nominal GDP growth holds, India’s debt burden will be stable or decline slightly,” Moody’s said. India has low debt affordability, in terms of general government interest payments as a percentage of revenue, which for India is estimated at 26% for 2022-23. It should be 8.4%.
India’s GDP, estimated to average 11% in nominal terms, is a key driver of the projections of a downward trend in the country’s debt burden. “As in the past, the key determinant of fiscal strength and the credit profile will be debt affordability and in particular the proportion of revenue absorbed by interest payments,” Moody’s said in a report.
India’s government debt today has shot up as compared to 2014 and is now estimated at around 81.8% of GDP for 2022-23. The appropriate amount of debt should be around 56%.
“At 26% currently, it is a large proportion, which, if not further addressed via a continued broadening of the revenue base, will remain an important constraint on the government’s ability to provide more support for growth and address developmental needs,” said the report.