Gupta: India’s Public Debt to Fall from 84.3% to 75.1% by 2031-2032
Key Facts
Poonam Gupta, deputy governor of the Reserve Bank of India, projected that general government public debt would fall from 84.3% of GDP in fiscal year 2025-2026 to 75.1% by fiscal year 2031-2032. This trajectory puts debt on a downward path over the coming years, according to comments reported by Moneycontrol. Gupta said India enters this phase from a stronger position than most economies, citing robust growth, contained inflation, declining debt and a sound financial system. The projection comes as governments face mounting global pressure from rising bond yields and borrowing costs. Gupta said the resilience of India’s fiscal and banking position sets the country apart from economies facing more volatile and costly financing.
Assessing the risks, Gupta said India faces neither debt refinancing risks nor the risk of a debt blowout. This assessment takes on added significance amid rising public debt worldwide, which she expected to exceed 100% of GDP. She also pointed to higher sovereign bond yields, which mean more costly financing for emerging and developing economies and greater volatility in capital flows. These developments leave governments facing rising costs to service their obligations, even as their fiscal positions differ. By contrast, the outlook for India rests on the projected debt trajectory and what Gupta described as a sound financial system.
International Monetary Fund estimates show widening fiscal pressures globally: global public debt stood at just under 94% of GDP in 2025, and the fund projected it would reach 100% in 2029. That timing is a year earlier than the April 2025 projection, signaling an acceleration in the trajectory the fund expects. On borrowing costs, the average yield on 10-year government bonds in the Group of Seven rose by more than one percentage point between February and September 2026, reaching its highest level in nearly two decades. The fund also projected that the average effective interest cost of government financing would rise from 2.3% in 2021 to 3.7% in 2031. These figures help explain Gupta’s focus on external financing risks, particularly for emerging and developing economies.
In India, banking sector data point to strength in balance sheets. Banks’ capital adequacy ratio stood at 17.7% in March 2026, while the gross non-performing loan ratio fell to 1.8% in the same month. Gupta said the financial system is sound, in line with the indicators she cited on banks’ capitalization and asset quality. This resilience supports her assessment of the economy’s ability to weather a period of higher global financing costs, without removing the risks she flagged for emerging markets. According to India’s Ministry of Finance, the central government’s internal and external liabilities totaled 197.18 trillion rupees at the end of March 2026 and were estimated at 214.82 trillion rupees at the end of March 2027.
On economic activity, Gupta said India’s economy grew 7.8% in the first quarter of the current fiscal year, with momentum continuing in the second quarter. The HSBC Flash Composite Purchasing Managers’ Index rose to 56.7 points in October from 55.9 in September, with activity accelerating to its fastest pace since June. These indicators support the growth backdrop Gupta cited in discussing the economy’s ability to continue expanding, while the debt outlook remains tied to the trajectory of growth and public finances over a longer period. She said sustaining growth at 7% and moving toward 8% or more would require strengthening competitiveness in new sectors, keeping pace with technology and investing in human capital. This path puts improvements in productivity and economic capabilities among the priorities she identified for achieving higher growth rates.