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India's Fiscal Deficit And Public Debt UPSC NOTE


  • India's fiscal deficit and public debt have been a concern, even before the COVID-19 pandemic, with debt levels among the highest in developing countries and emerging markets.

  • Due to the pandemic, the fiscal deficit in 2020-21 increased to 13.3% and the aggregate public debt to 89.6% relative to GDP. 

  • As the economy recovered, the deficit and debt ratios decreased to 8.9% and 85.7%, respectively.

  • Projections suggest that the debt level is unlikely to return to pre-pandemic levels in the medium term, and the electoral budget cycle could further push the debt ratio, raising questions about its sustainability.

  • High deficits and debt have various consequences, including crowding out essential expenditures on infrastructure, human development, and green transition priorities.

  • The debt market in India is mainly captive, leading to constraints on lending to the manufacturing sector and increased borrowing costs for the government.

  • Achieving the recommended debt-to-GDP ratio of 58.2 would be unfeasible in the medium term.

  • Fiscal consolidation is crucial, and policy interventions should rethink the role of the state, focus on disinvestment, and enforce hard budget constraints to manage the debt burden effectively.



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Learnerz IAS | Concept oriented UPSC Classes in Malayalam: India's Fiscal Deficit And Public Debt UPSC NOTE
India's Fiscal Deficit And Public Debt UPSC NOTE
Learnerz IAS | Concept oriented UPSC Classes in Malayalam
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