India's debt to decline to 50-51% if it maintains a nominal growth rate of 10.5 %: SBI Funds

ANI New Delhi

If India maintains a nominal growth rate of 10.5 per cent its fiscal deficit is expected to reduce to 4 per cent of GDP in the next financial year (FY26), according to a report by SBI Funds. The report also projects that the government's debt will decline to 50-51 per cent by March 2031 if India continues to grow and maintains a nominal growth rate of 10.5 per cent until FY31.

It said "if we assume Nominal growth at 10.5 per cent until FY31 and fiscal deficit to consolidate to 4.0 per cent next year and stay put thereafter, government's debt could reduce to 50-51 per cent by FY31". The government has already outlined in its Fiscal Responsibility and Budget Management (FRBM) document that it will focus on reducing its debt as a key fiscal target. It has set a goal to bring the debt-to-GDP ratio to around 50 per cent by the end of FY31.

SBI Funds has worked out a scenario where the government can meet this target without making drastic changes to its fiscal policy. It says if India grows at a nominal rate of 10.5 per cent annually, the fiscal deficit is consolidated at 4 per cent in the next financial year. This means that between FY27 and FY31, the government can maintain a 4 per cent fiscal deficit and still achieve its debt reduction goals.