The Anatomy of Public Debt Reductions: Case of India

Abstract

India has witnessed an unprecedented surge in sovereign debt on the back of the pandemic. We outline the costs and risks associated with high debt in India, drawing on experiences across countries as well as India’s own past. We conclude with a discussion of the benefits of reducing debt and possible scenarios that could achieve a sizable reduction over the next decade.

This paper is a revised version of the article published by the Center for the Advanced Study of India based on a larger project at Systemic Issues Division in the Research Department at the IMF, to understand the evolution of public debt in the post-pandemic world across countries with a team including Sakai Ando, Josef Platzer, Adrian Peralta Alva, and Andrea Presbitero. We thank Santiago Acosta-Ormaechea, Elif Ceren, Nada Choueiri, Adrian Peralta-Alva, Dinar Prihardini, Francisco Roch and Jarkko Turunen for helpful comments, and Swapnil Aggarwal, Chenxu Fu and Manzoor Gill for excellent research support. All errors remaining are our own. Views expressed here are those of the authors and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.