IMF warns of India's rising debt and climate change risks, but govt disagrees, says report

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International Monetary Fund (IMF) has raised concerns about the long-term sustainability of India's debts. It cautioned that general government debt is likely to exceed 100 percent of India's gross domestic product (GDP) in the near future, Business Standard reported.

The need for significant investment towards climate change targets was also in focus. “Long-term risks are high because considerable investment is required to reach India’s climate change mitigation targets and improve resilience to climate stresses and natural disasters.

This suggests that new and preferably concessional sources of financing are needed, as well as greater private sector investment and carbon pricing or equivalent mechanism," the IMF said in its annual Article IV consultation report. Also Read: India Expected to contribute over 16% to global growth, says IMF However, the Indian government has contested these warnings, stating that risks associated with sovereign debt are notably limited as it is mainly in domestic currency.

KV Subramanian, India’s executive director at the IMF, expressed disagreement with the IMF's projections in the same report, citing historical shocks experienced by India and emphasising the limited increase in the public debt-to-GDP ratio. He said, “The same can be said of the staff prognosis that debt sustainability risks are high in the long term.

The risks from sovereign debt are very limited as it is predominantly denominated in domestic currency. Despite the multitude of shocks, the global economy has faced in the past two decades, India’s public debt-to-GDP ratio at the general government level has barely increased from 81 percent in 2005-06 to 84 percent in 2021-22, and back to 81 percent in 2022-23." Also Read: