The Centre’s overall liabilities are on a medium-term declining trajectory with low roll-over risk, an annual status paper on public debt released on Wednesday showed.

This Status Paper, fifth in the series, showed that the government’s debt profile was comfortably placed in terms of sustainability parameters of public debt.

Prudent profile The government’s debt portfolio was characterised by prudent risk profile with share of short-term debt within safe limits and relatively long maturity of outstanding debt. As of end March 2015, India’s short-term debt as a percentage of GDP stood at 5.1 per cent. The Status Paper also showed that most of the public debt in India is at fixed interest rates, with only around 1 per cent floating rate debt at end March 2015.

Safe from volatility This insulates the debt portfolio from interest rate volatility and provides stability to budget in terms of interest payment.

One of the salient features of the government debt is the compositional shift towards marketable debt – share of marketable securities in total internal liabilities increased from 43 per cent in 2000-01 to 78.5 per cent at end March 2015.

The government is moving towards alignment of administered interest rates with the market rates, such as interest rate on small savings, the Status Paper said.

The government is also continuing its efforts to elongate the maturity profile of its debt portfolio for lower rollover risk, the Status Paper said.

Govt securities Weighted average residual maturity of outstanding government securities at end-March 2015 was 10.23 years which is high compared to international standards.

The tenor of dated securities goes up to 30 years as at end-March 2015, which is extended further to 40 years now after successful issuance of 40-year bond in October 2015.

At end-March 2015, about 28.2 per cent of outstanding stock had a residual maturity of up to five years, indicating a relatively lower roll-over risk in the medium term, which is further supported by the government’s active debt management in terms of switches and buy backs.

The largely domestic and institutional investor profile contributes to stable demand for government securities. Ownership pattern of dated securities indicates a gradual broadening of market over time.

The share of commercial banks dropped from 61per cent in end-March 2001 to 43.3 per cent in end-March 2015.

With the announcement of Medium Term Framework for a more predictable regime for investment by the foreign portfolio investors, the FPI share is expected to increase further to five per cent by end- March 2018.

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