The IMF’s Directors had really helpful “ambitious medium-term consolidation efforts given (India’s) elevated public debt levels and contingent liability risks”.
| Photo Credit: Reuters
The Union Finance Ministry on Friday sought to dispel “certain” factually incorrect “presumptions” being made about India’s indebtedness ranges from a scenario-based evaluation by the International Monetary Fund (IMF) that warned authorities debt may hit 100% of GDP by 2027-28 beneath antagonistic circumstances.
“In the light of the IMF’s latest Article IV consultations with India, certain presumptions have been made taking into account possible scenarios that does not reflect factual position,” the Ministry stated.
Noting that comparable IMF reviews for different international locations present a lot increased excessive eventualities for them, the Ministry confused that any interpretation that the report implies that basic authorities debt would exceed 100% is misconstrued.
Stressing that its assertion will not be a critique of the IMF’s evaluation, the Ministry stated this was a clarification of factual place and never a “rebuttal” to the IMF, however “rather an effort to arrest misinterpretation/misuse of the comments in the IMF document”.
General authorities debt contains debt of each the Centre and the States, and had dipped “steeply” from about 88% in 2020-21 to about 81% in 2022-23, the Ministry stated, sharing a cross-country comparability on debt ranges to claim that “India has done relatively well and is still below the debt level of 2002”.
The IMF’s Executive Board stated on Monday it had concluded its annual session with India, and its Directors had really helpful “ambitious medium-term consolidation efforts given elevated public debt levels and contingent liability risks”.
“While the budget deficit has eased, public debt remains elevated and fiscal buffers need to be rebuilt”, the IMF stated, including that the Board inspired “authorities to put in place a sound medium-term fiscal framework to promote transparency and accountability and align policies with India’s development goals”.
“Among the various favourable and unfavourable scenarios given by the IMF, under one extreme possibility, like once-in-a-century COVID-19, it has been stated that the General Government’s debt could be ‘100% of debt-to-GDP ratio’ under adverse shocks by 2027-28. It talks only of a worst-case scenario and is not fait accompli,” the Ministry stated.
“The corresponding figures of ‘worst-case’ scenarios for the U.S., U.K. and China are about 160%, 140%, and 200%, respectively, which is far worse compared to 100% for India… It is also noteworthy that the same report indicates that under favourable circumstances, the General Government Debt-to-GDP ratio may decline to below 70% in the same period,” it emphasised.
“The shocks experienced this century by India were global in nature, e.g., the global financial crisis, Taper Tantrum, COVID-19, Russia-Ukraine War, etc. These shocks uniformly affected the global economy and barely few countries remained unaffected. Therefore, any adverse global shock or extreme event is expected to unidirectionally impact all the economies in an interconnected and globalised world,” the assertion stated.
The IMF, beneath Article IV of its Articles of Agreement, holds bilateral discussions with members, often yearly. A workers staff visits the nation, collects financial and monetary data, and discusses with officers the nation’s financial developments and insurance policies. On return to headquarters, the workers prepares a report, which kinds the idea for dialogue by the Executive Board.
