DEBT SUSTAINABILITY OF INDIA
DEBT SUSTAINABILITY OF INDIA

Summary/Abstract: Poorly structured debt has been important cause of indulging economic crisis in several emerging economy. In the case of India, less attention has been paid to the level, cost and structure of India's overall public debt, both domestic and external. The present paper tries to analyze the trend and composition of India’s debt situation at Central and state level. It makes an evolution of India’s efforts towards achieving debt sustainability. It also tries to examine the debt sustainability through the theoretical debt sustainability criteria. Towards the end, the final section concludes. India’s current public debt level can be termed sustainable. India’s public debt remains sustainable given manageable interest rate cost and economic growth. The share of India’s external debt is small; nearly all of the government debt is in fixed interest rate loans. Predominance of internal debt in India’s total public sector debt has been a major factor in containing India’s vulnerability to development. However, to the extent that internal borrowings by the public sector crowd out private sector domestic borrowings, the country’s vulnerability to external developments may grow as the private sector’s external debt increases.

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