India’s Government Debt Projected to Hit 5-Year Low: A Fiscal Milestone Ahead

India's central government debt is expected to drop to a five-year low of 56.8% of GDP in the current fiscal year, down from 58.2% last year, according to Minister of State for Finance Pankaj Chaudhary.

However, in absolute terms, the debt is projected to rise to ?185.27 lakh crore in FY25 from ?171.78 lakh crore last fiscal year. This figure includes the Centre's external debt at the current exchange rate and other liabilities.

Citing IMF data, Chaudhary noted that India's GDP at current prices reached $3.57 trillion in FY24.

Reducing the debt ratio has been a key focus of the latest budget. Presenting the FY25 budget, Finance Minister Nirmala Sitharaman emphasized the goal of maintaining a fiscal deficit each year that ensures the central government debt declines as a percentage of GDP from FY27 onwards. The government is committed to fiscal consolidation, with the debt ratio steadily decreasing from the pandemic-induced high of 61.4% of GDP in FY21.

Finance Secretary TV Somanathan highlighted that from 2026-27, reducing the debt ratio will be the primary anchor for fiscal management, rather than the fiscal deficit. The fiscal deficit target for FY25 has been cut to 4.9% of GDP from the interim budget's 5.1%, with an aim to keep the fiscal gap at 4.5% by FY26 according to the budget proposals.

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