What does the Debt to GDP Ratio data represent?

The Debt to GDP Ratio also known as Debt as % of GDP measures a country's total government debt in relation to its nominal Gross Domestic Product (GDP).

It compares what a country owes to what it produces, providing a clear picture of its economic health and fiscal sustainability.

The Fiscal Responsibility and Budget Management (FRBM) Act, 2003, provides that the Central Government shall endeavour to limit the General Government Debt to 60% of GDP and the Central Government Debt to 40% of GDP by March 31, 2025. Central Government Debt includes external public debt valued at current exchange rates, total outstanding liabilities on Public Account including investment in Special Securities of States under NSSF and EBR liabilities, etc.

What is the significance of the Debt to GDP Ratio data?

Debt to GDP Ratio indicates the country's ability to manage and service its debt.

A sustainable Debt to GDP ratio is crucial for long-term economic stability and growth.

Investors use this ratio to assess a country's creditworthiness and risk of default.

It reflects the effectiveness of government fiscal policies, including spending, borrowing, and taxation.

To assess the long-term sustainability of the country's fiscal path, considering the implications of current debt levels on future economic growth and stability.

Compare the ratio with global standards to understand its fiscal position relative to other economies.

How to interpret the Debt to GDP Ratio data?

A higher ratio suggests greater fiscal stress, which can deter investment and increase borrowing costs.

Rising debt levels might be expected during downturns due to increased government borrowing for stimulus.

A rising Debt to GDP ratio may call for fiscal policy adjustments, such as reducing public spending or increasing taxation.

In economic downturns, an increasing ratio is often seen due to stimulus measures, while in growth phases, a stabilising or decreasing ratio is typically favourable.

High debt levels can influence interest rates and inflation, affecting the overall economy.