On January 19, 2018, several media houses reported how the central government debt had greatly increased under the Modi government. The headline of India Today shouted how the central debt under the Modi government had increased by 50%, and Economic Times reported that India’s debt increased by 50% in the Modi era, according to the 8th Edition of the Document. State on Public Debt that was published on Friday.
Soon, the anti-Modi brigade clung to the report and began to use it to ridicule the Modi government.
— Ashok Swain (@ashoswai) 19 January 2019
India’s debt burden in June 2014 was ₹54,90,763 Cr which touched ₹82,03,253 Cr in Sept 2018 !
No Industrial growth,
Severe job cuts,
Adverse Unemployment &
An unprecedented farm distress
but Debt burden vehemently increased by 50%https://t.co/XVBQQfQq0Q
— Maharashtra Congress (@INCMaharashtra) 19 January 2019
As per the 8th Edition of the Status Paper on Govt. Debt, under Modi-regime India’s debt, has increased by 50%.
From Rs 54,90,763 crore in June 2014 to Rs. 82,03,253 crore in September 2018. Chowkidar has surely incapacitated Indian economy!https://t.co/oSxk3kNXTA
— Raksha Ramaiah 🇮🇳 (@RakshaRamaiah) 19 January 2019
Growth story under the #BJPGovt is all about the meteoric rise in debt that this government has accumulated since 2014.The Jumla of Acche Din is before the public & they will vote the #BJP out in 2019 for their disastrous administration of the country. https://t.co/F519EKhiWv
— Rajeev Satav (@SATAVRAJEEV) 19 January 2019
Compared to the latest data available till September 2018 when the total debt of the Central government stood at Rs 82,03,253 crore, the corresponding amount till June 2014 was Rs 54,90,763 crore, the Finance Ministry’s data on government borrowings shows.https://t.co/p3TsPW1iVO
— Indian Overseas Congress (@INCOverseas) 19 January 2019
What the reports do not clarify:
The increase in debt is perfectly normal, in fact, India is better than many important economies in this parameter.
The central government borrows money (from internal and external sources) to finance the fiscal deficit. Public debt is nothing more than an accumulation of fiscal deficits over the years. Government debt in recent years has always increased. The important factor here is the sustainability of the debt, and the most important parameter to assess sustainability is the debt / GDP ratio (because as GDP increases, government revenues increase and, therefore, its capacity to increase debt service). In the case of India, the debt / GDP ratio of the central government has been hovering around 44-47% since 2010 and has shown an improvement in the Modi government.
The above graph shows that the ratio has improved from 46.98% in 2013 to 45.11% in 2017. Similarly, the gross general public debt, which includes loans from both central and state governments, has oscillated between 67% and 72% from 2010 and it is expected that In constant decline until 2024.
The Ministry of Finance, in a recent press release, commented on the government debt.
The general liabilities of the central government are on a downward trajectory in the medium term and the government debt portfolio is characterized by a prudent risk profile. The government is mainly resorting to market-linked loans to finance its fiscal deficit. The conventional indicators of debt sustainability, that is, the debt / GDP ratio, the payment of interest on income, the actions of short-term debt / external debt / FRB in total debt indicate that the government’s debt profile it is comfortably in terms of parameters of debt sustainability and is constantly improving.
Under UPA, central government debt increased at a much higher Rate
While all the reports and tweets from the opposition leaders pointed to the 49% increase in central government debt under the Modi government, they conveniently forgot to compare it to what happened during the UPA government. OpIndia’s analysis shows that central government debt increased 68% under UPA-I and 89% under UPA-II. Overall, the debt more than tripled in 10 years of UPA. But why show the full picture when half helps your propaganda?
When it comes to foreign debt (loans from governments and foreign institutions), the figure registered an increase of 443% in UPA-I, 60% in UPA-II and 0.04% in the Modi government. This underlines the statement of the Ministry of Finance that the government is resorting mainly to market-linked loans to finance the fiscal deficit.
Thus, the number 49% is more hype and less substance. But it’s the election season, so expect much more deceptive news based on half-truths.