What Level of Public Debt Could India Target?

Author/Editor:

Petia Topalova ; Dan Nyberg

Publication Date:

January 1, 2010

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

This paper discusses possible medium-term public debt targets for India, based on evidence from the economic literature on prudent levels of public debt and the feasibility for the country to meet a particular target over the next 5-6 years. While recognizing the challenges in determining an appropriate debt target, cross-country analysis and simulations suggest that a debt ratio in the range of 60-65 percent of GDP by 2015/16 might be suitable for India. Such a debt ceiling, while still above the average debt level for emerging markets, is within the range of debt ratios that would provide room for countercyclical fiscal policy and contingent liabilities. It would also send a strong signal of the government's commitment to fiscal consolidation by making a clear break with the past.

Series:

Working Paper No. 2010/007

Subject:

Emerging and frontier financial markets Financial markets Financial services Fiscal policy Government debt management Public debt Public financial management (PFM) Real interest rates

English

Publication Date:

January 1, 2010

ISBN/ISSN:

9781451961836/1018-5941

Stock No:

WPIEA2010007

Pages:

27

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