The Chief Economic Adviser to Government of India, V Anantha Nageswaran, today defended the rise in India’s debt — a point on which the Opposition has recently criticised the government — saying that the growth in debt was only consistent with the economic growth. 

“Government’s borrowings go up as the economy grows,” he said to an audience of the Federation of Indian Chambers of Commerce and Industry (FICCI), here.  He said this when a member of the audience asked for his response to the criticism levelled by the Congress party that after the Modi government took over in 2014, the government’s debt increased from ₹55-lakh crore to ₹155-lakh crore.  

The CEA stressed that it was wrong to look at the numbers purely in absolute terms. He said that between 2004 and 2014, government’s debt went up nine times; between 2014 and 2023, it went up three times. 

Sustainable borrowing

As a percentage of the country’s GDP, the total debt of the government (Centre and States) was 81 per cent in 2005; it only rose 3 percentage points to 84 per cent, after 17 years, in 2021-22. The government debt of many other countries went up 20-30 times during the same period, Nageswaran said. 

Looking at the issue from another angle, he said that India’s nominal GDP growth is 11-12 per cent, while the government’s cost of borrowing is only 7 per cent. “So, our debt is sustainable and has not grown disproportionately.” 

Nageswaran said earlier in his speech that in the second decade of this century the private sector was cleaning up its balance-sheet, having borrowed unsustainably in the previous decade. Referring to that point in the context of government’s debt, he said, “In a decade when the private sector is nursing its balance-sheet, somebody has to borrow and spend.”