What are the risks associated with India's high debt like China
India has high debt like China, but risks are moderated: IMF
The risks associated with India's high debt, although comparable to China, are considered to be moderated, according to the International Monetary Fund (IMF). Some of the key points to understand about India's debt situation and the associated risks are:
- Debt levels: India's debt levels have been on the rise in recent years. The total public debt-to-GDP ratio is relatively high, mainly due to increased expenditure and low revenue mobilization.
- External debt: India's external debt is also substantial, but it is mostly long-term and predominantly denominated in domestic currency, which reduces the risk of exchange rate fluctuations and refinancing challenges.
- Low reliance on foreign funding: India has maintained a lower reliance on foreign funding compared to China, reducing vulnerability to external shocks and potential capital outflows.
- Sustainable growth: The IMF believes that while India's debt situation requires attention, the country's growth prospects and policy frameworks indicate a relatively moderate risk, particularly with its focus on structural reforms and fiscal consolidation.
- Banks and public sector enterprises: The substantial debt burdens of Indian banks and state-owned enterprises pose risks to India's overall fiscal stability. Addressing these challenges and strengthening the banking sector remains essential.
Answered
a year ago