Government stretches maturity of debt to ease redemption pressure

The government has extended the maturity profile of its debt to reduce short-term redemption pressure, the finance ministry indicated in a paper released today.

The paper, titled `Government Debt - Status and road ahead', shows a reduction of 8.1 per cent of GDP in the consolidated debt for general government during five-year period from 2010-11 to 2014-15.

In the terminal year (2014-15) the targeted debt of general government is 64.9 per cent of the GDP as against 68 per cent recommended by the 13th Finance Commission.

The current level of general government debt at 73 per cent of GDP and the proposed debt levels indicated in the road map are considered sustainable keeping in mind the long maturity profile of existing government debt, lower proportion of external debt, high percentage of fixed rate debt, higher rate of domestic savings as proportion of GDP and likely growth of GDP in coming years, the report said.

In all these parameters, India is better placed than most of the other developed and developing economies of the world, it noted.

The paper seeks to introduce the concept of 'adjusted debt' of government, which, it said, factors in the impact of external debt at current change rate and netting out market stabilisation scheme and NSSF liabilities not used for financing central government deficit.

While analysing the consolidated debt for central and state governments, 14 days T-bills investment by states and central loans to state governments have also been netted out to avoid double accounting, it said.

While there is no deviation from the commitments on fiscal consolidation enumerated in the medium term fiscal policy statement 2010-11, the paper said the road map has been worked out on the basis of separate debt targets for the centre and the states for the award period of the 13th Finance Commission.