Fin Min weighing options to reduce government's debt, says Nirmala Sitharaman

According to Finance Minister Nirmala Sitharaman, the government is conscious of the burden it is leaving for future generations.

The finance ministry is looking at ways to reduce the level of debt of the government, Nirmala Sitharaman said on October 20.

"We are conscious of the debt of the Government of India today. Compared to many others it might not be as high as it is. But even there, we are consciously looking at experiments in different parts of the world," the finance minister said.

Also Read: Centre hoping to cut annual borrowing to Rs 12-13 lakh crore in next few years

"Some of the data about some emerging market countries, about how they are managing their debt, is something which is actively in our minds in the ministry (of finance) and we are looking at ways in which we can bring down the overall debt. And we are, I am sure, going to be very successful in that because I have heard some very well streamlined (ways) to meet India's aspirational requirements but deal with it with a sense of responsibility so that our coming generations don't feel the burden that the government has left them then," she added.

The finance minister was speaking at the Kautilya Economic Conclave in New Delhi.

India's public debt has been cited as a key constraint to its credit rating profile by global rating agencies, who said the combined debt of the Centre and states was high even before the Covid pandemic struck in early 2020 and led to a sharp increase in the general government debt to around 90 percent of India's GDP.

As part of its fiscal consolidation efforts, the Centre is hoping to lower its fiscal deficit to 5.9 percent of GDP this year with the aim of cutting it to a maximum of 4.5 percent of GDP by 2025-26.

However, ratings agencies want greater movement on the same, with Christian de Guzman, Moody's Investors Service's primary analyst for India, telling Moneycontrol last month that fiscal deficits "much narrower" than 4.5 percent of the GDP would lead Moody's to re-examine its assessment India's fiscal strength as only then would it lead to "more material debt reduction than we currently project".

Also Read: Moody's to re-examine India's fiscal strength when deficit well below 4.5%

Speaking at the Kautilya Economic Conclave on October 20, Sitharaman also said the government was keen to adhere to the "bang for the buck argument" and had been doing so since the pandemic struck, when it chose to spend heavily in terms of capital expenditure rather than heed calls to periodic suggestions that money should be transferred directly to the public as "they are suffering".

"We dared not to do it... Some principles of economics stand the test of time. And that is when you spend money on capital expenditure and with digitised approach, you are remaining transparent, people can see where that money is going, there are no kickbacks, public spent money gets its return, and therefore you can stand up and tell to the next generation that we have been careful not to burden you," the finance minister said.

Also Read: Centre's FY24 finances get unexpected boost from direct tax collections in August