Congress Leader Supriya Shrinate Takes Swipe At Modi's '₹150 Lakh Crore Loan' After IMF Cautions On India's Rising Debt

Taking a jibe at the Modi government, Supriya Shrinate, Chairperson Social Media and Digital Platforms at INC India said on Friday that Narendra Modi alone took a loan of "Rs 150 lakh crore" compared with the past 14 prime ministers. Shrinate's remarks came after an IMF flagged concerns about potential challenges for India's economic landscape stating the country's general government debt surpassing 100 per cent of its GDP in the foreseeable future.

IMF's Cautionary Note

The International Monetary Fund (IMF) flagged concerns on Tuesday, December 19, indicating potential challenges for India's economic landscape. Their cautionary note highlighted the risk of India's general government debt surpassing 100 per cent of its gross domestic product (GDP) in the foreseeable future. Moreover, the IMF emphasized the pressing need for substantial investments aimed at meeting the country's climate change mitigation objectives, as reported by Business Standard.

In its annual Article IV consultation report, the IMF emphasized the elevated long-term risks owing to the substantial investment required to achieve India's climate change mitigation goals and enhance resilience against climate-related challenges and natural disasters. This underlines the necessity for new and preferably concessional financing sources, alongside increased private sector investment and the implementation of carbon pricing or equivalent mechanisms.

Indian Government's Disagreement

In contrast to the IMF's apprehensions, the Indian government refuted the severity of sovereign debt risks, citing the predominant reliance on domestic currency denomination as a key mitigating factor.

Subramanian's Remarks

In the same report, KV Subramanian, India’s executive director at the IMF, presented an alternative perspective. He contrasted the staff view in the 2022 Article IV report, which suggested India's fiscal space was at risk, with a recent recognition by the staff that indicated mitigated risk factors and moderate sovereign stress. Subramanian challenged the notion that India's debt might surpass 100% of GDP in the medium-term due to historical shocks, deeming it an extreme baseline assertion. Similarly, he questioned the staff's prognosis about high debt sustainability risks in the long term.

Emphasizing the limited risks from sovereign debt, Subramanian pointed out its predominant denomination in domestic currency. He highlighted that despite the array of global economic shocks witnessed over the past two decades, India's public debt to GDP ratio at the general government level displayed minimal fluctuation, hovering around 81 per cent in 2005-06, rising marginally to 84 per cent in 2021-22, and reverting to 81 per cent in 2022-23.

Exchange Rate Regime Reclassification

The IMF also reclassified India's exchange rate regime from "floating" to a "stabilised arrangement," a move that faced opposition from India, which deemed it "unjustified" and founded on "subjective selection."

Published on: Friday, December 22, 2023, 04:29 PM IST