Context: Recently, the Indian government said on a warning from the International Monetary Fund (IMF) that the country’s debt to GDP ratio could hit 100% was a worst-case scenario, and not a “fait accompli”.

Key Reply of Finance Ministry

• The IMF, in a so-called article IV review, said India’s general government debt, which includes federal and state government debt, could be 100% of GDP under adverse circumstances by fiscal 2028.

• India’s finance ministry said this was “a worst-case scenario and is not fait accompli”.

• India’s debt to GDP ratio, which was 81% in 2022/23, may decline to below 70% in the same period under favourable circumstances, the IMF report also said, according to the ministry.

• “Therefore, any interpretation that the report implies that General Government debt would exceed 100% of GDP in the medium term is misconstrued,” the ministry added.

India – The debt status of India can be inferred from the below images:

International Debt Report 2023

• The International Debt Report 2023 was recently released by the World Bank that analyse 122 low and middle-income countries that report to the World Bank Debt Reporting System (DRS).

• The International Debt Report 2023 is the 50th edition of the World Bank’s annual publication on external debt along with the International Debt Statistics (IDS) database.

• It is the most comprehensive and transparent source of verifiable, cross-country comparable external debt data of low and middle-income countries (LMICs).

• The report analyse 122 low and middle-income countries that report to the World Bank Debt Reporting System (DRS) that report to the World Bank Debt Reporting System (DRS).

• Developing countries – Debt-service payments, which include principal and interest, increased by 5% in 2022 over the previous year for all developing countries.

• For the first time since 2015, the private creditors have received more funds than they put into developing countries.

• LMICs – Debt servicing costs on public and publicly guaranteed debt are projected to grow by 10% for all developing countries over the 2023–24 period and by nearly 40 % for low-income countries.

• LMICs in particular are struggling with the effects of an ongoing war in Europe, rising energy prices, sharply higher interest rates and slowing growth.

• Currently, about 60% of low-income countries are at high risk of debt distress or already in it.

• In 2022, the low and middle-income countries paid a record USD 443.5 billion to service their external public and publicly guaranteed debt.

• The external debt stock of low and middle-income countries (LMICs) decreased by 3.4%.

• Poor countries – Over the past decade, interest payments by poor countries have quadrupled to an all-time high of USD 23.6 billion in 2022.

• Overall, debt-servicing costs for the 24 poorest countries are expected to increase by 39% in 2023 and 2024.

• 2023 projection – Global gross domestic product (GDP) growth is set to slow in 2023.

• According to the World Bank’s latest projections, global growth in 2023 is expected to slow to 2.1%.