India Likely To Have Stable Debt-To-GDP Ratio

A senior IMF official predicted on Wednesday that India’s debt-to-GDP ratio will remain constant in the future and suggested rationalizing and streamlining the Goods and Services Tax (GST). According to Paolo Mauro, Deputy Director of the IMF Fiscal Affairs Department, the growth in the global public debt-to-GDP ratio would gradually resume in the medium term. “We forecast that the global public debt-to-GDP ratio would reach 100% once more by 2028.

The scenario has altered since, at the height of the epidemic, central banks and governments were intensely focused on assisting citizens, businesses, and preventing an economic collapse and deflation. They are currently in a radically different situation with significant inflation and undoubtedly considerably more brisk economic activity. The IMF predicts a significant increase in China’s debt ratio since the country’s economic growth may be a little slower than in recent years, in part due to population ageing.

In response to a query regarding India, Mauro stated that the deficit is suitably reduced and that infrastructure is appropriately prioritized in this year’s Union Budget.

We are not discussing a complete redesign, but rather a possible slight rationalization. There are numerous things that qualify for preferential GST treatment, as well as numerous rates. Therefore, Mauro stated, “Just making it a little bit simpler would be beneficial.

“It would be appropriate to reverse those again,” he remarked in reference to the early 2022 reductions in the fuel excise tax. “At some point, you don’t want to be giving these generalized subsidies to everyone,” he added. Supporting those who are genuinely in need is necessary, but not always.

 

The next stage, he continued, is to broaden the base for both personal and corporate income taxes, but he also cautioned that subsequent financial ramifications might become apparent. Given everything that has happened in the energy markets, “there are some companies in particular, in the electricity distribution sector that may be under difficulties and therefore there may at some point be the need for intervention on the part of the government,” Mauro added.