India Projects Declining Debt-to-GDP Ratio Amid Global Debt Surge

India stands out as the only major economy projected to reduce its debt-to-GDP ratio by 2031, driven by fiscal consolidation and strong growth, even as global public debt levels are expected to rise significantly.

India's Favourable Debt Trajectory

India is projected to be the only emerging market economy among nine economies with gross domestic product (GDP) exceeding USD 1 trillion to reduce its government debt-to-GDP ratio between 2025 and 2031, Reserve Bank of India Deputy Governor Poonam Gupta said, highlighting the country's stronger fiscal position amid rising global debt and borrowing costs.

Addressing the Business Standard BFSI Insight Summit, Gupta said India's general government debt is projected to decline from 84.3 per cent of GDP in 2025-26 to 75.1 per cent by 2031-32, even as debt ratios in most advanced and emerging economies are expected to rise.

Global Debt Landscape and India's Resilience

Citing the International Monetary Fund's October 2026 projections, she said global public debt stood at 94 per cent of GDP in 2025 and is expected to cross 100 per cent in 2030, reaching nearly 102 per cent in 2031. The debt trajectory of advanced economies is projected to worsen, with their debt ratio rising from 108.2 per cent of GDP in 2025 to 115.2 per cent in 2031. For emerging market and developing economies, the ratio is expected to increase from 73.7 per cent to 84.2 per cent over the same period.

Factors Driving Fiscal Consolidation

Gupta attributed India's comparatively favourable outlook to fiscal consolidation, strong nominal GDP growth and a lower primary deficit. Nominal GDP growth is projected at around 11 per cent annually, above the effective interest rate on government debt of about 7 per cent, helping keep the debt ratio on a declining path.

She also highlighted improvements in the quality of government expenditure, with general government capital expenditure rising to 5.8 per cent of GDP in 2025-26 from around 4 per cent in 2019-20. Higher capital expenditure can help sustain debt by attracting private investment and strengthening the economy's growth potential, she said.

Risk Management and Economic Stability

Gupta cautioned, however, that the global fiscal environment remains challenging, with rising borrowing costs and elevated debt levels limiting governments' ability to respond to future economic shocks. India's public debt is largely long-term, denominated in domestic currency and held domestically, factors that limit refinancing risks, she said.

The RBI Deputy Governor added that India had maintained fiscal prudence while managing external shocks, rather than relying exclusively on fiscal measures to support the economy.

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