India’s national debt trajectory from 1990 to 2025 highlights an undeniable upward trend, driven by economic expansion, government policies, and changing global dynamics. A closer look at the numbers reveals both opportunities for growth and challenges for fiscal sustainability.

Key Observations Over Time

1. Absolute Growth in Debt

• In 1991, the external debt was $83.8 billion; by 2024, the national government debt soared to $2,113.5 billion.

• This staggering rise reflects increasing borrowing needs to fund infrastructure, welfare programs, and economic recovery initiatives.

2. Shifts in Debt-to-GDP Ratios

• From 28.3% in 1991, the ratio decreased to 17.1% in 2006, reflecting a phase of economic stability and controlled borrowing.

• The ratio rebounded to 58.3% in 2024, signaling a significant escalation in debt reliance.

3. The 2021–2024 Spike

• Debt jumped from $573.7 billion (2021) to $2,113.5 billion (2024).

• The debt-to-GDP ratio nearly tripled, raising concerns about fiscal strain.

• This increase is attributed to:

• Pandemic recovery measures requiring higher government spending.

• Infrastructure investments and welfare programs.

• A shift in data focus from external debt to national government debt.

Understanding the Data

External Debt vs. National Government Debt

• External Debt (1991–2021): Only liabilities owed to foreign creditors.

• National Government Debt (2024): Includes both domestic and external borrowing, explaining the sharp numerical rise in recent years.

Implications and Risks

1. Economic Growth vs. Fiscal Strain
• Borrowing supports growth initiatives but also increases debt servicing costs.

2. Reduced Flexibility
• High debt-to-GDP ratios may limit fiscal options during crises.

3. Global Perception
• Rising debt can affect credit ratings, investor confidence, and foreign investments.

Way Forward

• Prudent Fiscal Policies: Managing expenditure while optimizing revenue.

• Debt Composition: Favoring long-term, low-interest borrowing.

• Economic Reforms: Boosting GDP to balance the debt ratio.

• Debt Monitoring: Transparent reporting and tracking to ensure sustainability.

Final Thought

India’s national debt reflects a dual narrative—growth potential balanced against fiscal challenges. While borrowing has driven development, the sharp rise post-2021 calls for cautious management to ensure long-term stability.

What do you think about this? What’s your pov on this?