India is facing a big problem: its debt is getting too high. The International Monetary Fund (IMF) says that India’s debt could go over 100% of its GDP (the total value of goods and services produced in the country) in the next few years. This means that the government owes more money than it makes.
Why is this a problem?
Because high debt can make it harder for the government to pay for important things like health care, education, and infrastructure. It can also make it more expensive for the government to borrow money from other countries or investors. And it can hurt the economy by reducing growth and creating inflation.
The IMF says that India’s debt went up a lot because of the Covid-19 pandemic, which caused a lot of damage to the economy and people’s lives. The government had to spend more money to help people and businesses survive the crisis, but it also lost a lot of money from taxes and other sources³. The IMF says that India’s debt-to-GDP ratio (the percentage of debt compared to GDP) jumped from 67.1% in 2014 to 88.5% in 2021.
The IMF says that India’s debt-to-GDP ratio will go down a bit to 83.1% in 2023, but then it will go up again to 100.6% by 2028. The IMF says that this is very risky, and that India needs to have a plan to reduce its debt and make sure it can pay it back. The IMF also says that India needs to be careful about climate change, which can cause more problems for the environment and the economy.
But the Indian government does not agree with the IMF. The government says that the debt-to-GDP ratio is not a good way to measure how well the government is doing. The government says that India is different from other countries, because it has a lot of people who work in the informal sector (like street vendors or farmers) and who do not pay taxes or get benefits from the government¹. The government also says that it is doing a lot of things to make the economy grow faster, collect more taxes, and spend money more wisely. And the government says that it is committed to fighting climate change and reaching the goal of zero emissions by 2070.
