Budget Byte: Borrowing to boost spending but debt will bother govt

Government borrowed heavily in FY21 to sustain the Covid-19 revenue shock. This may take India’s bulging debt pile to close to 90 per cent of gross domestic product. But as long-term debt grows, interest payments rise in coming years. In FY21 till November, interest expenses were almost half of the revenue receipts.

But even before Covid-19 struck the economy, government was borrowing at a rate that was very close to the nominal GDP growth. As FY21 ends, economic growth would still probably lag the rate at which corporates borrow. The earlier nominal GDP growth outpaces long term interest rates in the economy, the better.

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