What are the real costs of India’s high levels of public debt? https://scroll.in/article/1029466/what-are-the-costs-of-indias-high-levels-of-public-debt Prachi Mishra & Nikhil Patel 5 Aug 2022
High expenditures on interest payments mean fewer resources for countercyclical fiscal policies and social spending in critical areas.
Notwithstanding the high level of sovereign debt, there are a few silver linings for India. The share of sovereign debt held by foreigners – an important predictor of crises in the literature – is low...
costs of high debt. A major one is foregone resources on account of strikingly high interest payments, which at almost 30% of overall revenues during Covid-19, are close to three times higher for India than the typical emerging market...
High expenditures on interest payments reduce the resources available for countercyclical fiscal policies in the event of negative shocks such as Covid-19, as well as for social spending in critical areas such as health and education, where India’s public spending remains markedly below peers...
Finally, public debt exemplifies an important factor in the assessments of rating agencies too, where India’s debt and deficits stand out as being markedly higher than similarly rated peers.