(Bloomberg) -- India’s government plans to reduce its debt ratio to about 50% of gross domestic product over the coming years and sustain it around that level, a person familiar with the matter said.
The goal is to cut the ratio — which was 58.2% in the fiscal year that ended in March — to pre-pandemic levels by lowering it by 0.5 percentage points a year, the person said Wednesday, asking not to be identified as the discussions are private. The debt ratio was 44.5% in the 2019 fiscal year.
The government has been steadily lowering its budget deficit and debt since the pandemic, a necessary step in order to win a credit rating upgrade. Finance Minister Nirmala Sitharaman pledged in her budget speech on Tuesday to narrow the deficit to 4.9% of GDP this year and 4.5% next year. She added that from 2026-27 onwards, “our endeavor will be to keep the fiscal deficit each year such that the central government debt will be on a declining path as percentage of GDP.”
Moody’s Ratings is closely monitoring India’s debt levels and interest cost, both of which remain high for the country compared with other peers rated in the Baa category, Gene Fang, an associate managing director of sovereign risk, said Tuesday. India’s combined debt of the central government and the states will likely remain at about 80%, and may reduce at a “very gradual rate,” he said.
--With assistance from Anup Roy.
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