Every Indian has a debt of Rs 1,40,000
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New Delhi – The country’s total debt has reached 205 trillion rupees. This means that if India’s population is considered 142 crore, then the per capita debt is Rs 1,40,000. The International Monetary Fund (IMF) has told India that if the Government continues to borrow at the current pace, the country’s debt could reach 100% of the gross domestic product. This would make debt repayment difficult. The Indian Government has said that most of the debt is in Indian rupees, so there is no problem for the country.
This is how the foreign debt increased :
September 2023 : Total debt reached 205 trillion rupees. Of this, The Union Government has a debt of 161 trillion rupees, while the State Governments have 44 trillion rupees
Year 2014 : The total debt of the Union Government was 55 trillion rupees. This means that it increased by 192% in the last 9 years.
Year 2004 : When Manmohan Singh’s Government was formed, the Union Government had a debt of 17 trillion rupees.
Understanding the dynamics of debt and the economy
The country’s borrowing depends on the Government’s total income and expenditure. If expenditures exceed income, the Government is required to take loan. As The Government borrows, its deficit increases.
What is the main expenditure of the debt taken by India ?
- Since the Corona outbreak in 2020, the Government provides free grains to 800 million people every month.
- Under the Prime Minister’s Housing Scheme, 20 million people are given financial assistance to build houses.
- It is estimated that 90 million farmers are given 6,000 rupees annually.
- Under the Ujjwala scheme, it is estimated that 100 million women are given free gas cylinders.
The indirect relationship between debt increase and inflation
According to economist Madan Sabnavis, ‘There is no direct correlation between the country’s debt increase and inflation. The Government uses the debt money to increase the income. When the debt money comes into the market, the Government’s revenue increases. However, if the borrowed funds are misused, inflation can rise. When funds borrowed through debt are distributed among the general populace, people tend to purchase more goods, increasing demand in the market. If the supply does not match the increased demand, prices of goods may rise.
Borrowing is not always bad
Economist Suvarokamal Datta suggests that borrowing is not always detrimental to a country. India’s economy has expanded to over 4 trillion dollars (more than 333 trillion rupees). From this perspective, a debt of 205 trillion rupees does not appear excessive. The Government allocates these funds to projects like ‘Vande Bharat,’ which are essential for the Nation’s development, including infrastructure such as roads and airports.
Why did the International Monetary Fund warn India only ?
Countries like Japan are among the most indebted countries in the world. The most powerful country in the world, US, is ahead of India in terms of borrowing. Nevertheless, the reasons for the International Monetary Fund’s warning to India can be attributed to the following factors:
- Developed countries borrow from their own central banks, while India borrows from global institutions or large private entities. This makes debt repayment more challenging for India.
- Countries like the United States and China have their own currency reserves, which are much more substantial than India’s.
- Additionally, stronger currencies require lower interest payments, whereas the value of the Indian rupee is significantly lower than that of the US dollar.