The Central government’s debt surged to Rs 155.6 lakh crore or 57 per cent of the country’s gross domestic product (GDP) as on 31st March 2023 from Rs 58.6 lakh crore or 52.2 per cent of GDP as on March-end 2014, recording an increase of Rs 97 lakh crore in nine years, as per data provided by the Finance Ministry in Parliament on Monday.
“The government debt is held predominantly (about 95 per cent) in domestic currency. Outstanding external debt is financed by multilateral and bilateral agencies at concessional rates,” Union Minister of State for Finance Pankaj Chaudhary informed Lok Sabha on Monday.
The Centre’s debt rose sharply in 2020-21 as Covid-19 pandemic caused disruptions in the public finance. As a proportion of GDP the government debt surged by 9 percentage points to 61.5 per cent in 2020-21 from 52.4 per cent in the previous year. In absolute terms, the debt surged to Rs 121.9 lakh crore in 2020-21 from Rs 105.1 lakh crore in 2019-20.
Higher government spending, not matched by revenue, leads to a spike in debt. Fiscal deficit as a percentage of GDP surged to 9.2 per cent in the financial year 2020-21 due to spending on welfare schemes, pandemic containment measures, and low collections from taxes.
Buoyancy in tax collections have helped reduce fiscal deficits in the past couple of years. The fiscal deficit came down to 6.4 per cent of GDP in 2022-23 and it is estimated to ease further to 5.9 per cent of GDP in the current financial year.
In the Union Budget 2023-24, Finance Minister Nirmala Sitharaman outlined plans to reduce the fiscal deficit to below 4.5 per cent of GDP by FY 2025-26.
“Increasing the buoyancy of tax revenue through improved compliance, improving efficiency and effectiveness of public expenditure, augmenting productive efficiency of the economy etc. are the important measures taken by the government to bring down the debt and strengthen the economy,” Chaudhary said.
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