India’s high public borrowing is not unsustainable. But it leaves little room for policy missteps

economictimes.indiatimes.com:

Even if high, India's public debt is not unsustainable as per the standard metrics. A first criterion for sustainability is whether there is a significant rollover risk, where government suddenly finds it impossible to replace maturing debt at any price. A captive market for public debt among banks, insurance companies, provident funds and high household savings has enabled the government to fund its deficits without undue pressure on borrowing costs.

The currency composition and maturity of the debt further limit rollover risk. Nearly 90% of general government (GoI and state) debt is long term. The average maturity periods for GoI and state government loans have been increasing, contributing to its stability.

In 2000-01, about 13.5% of GoI debt was issued externally. Since then, there has been a steady decline in the share of external debt, which stood at 3.7% in 2021-22. Most external debt is concessional and owed to multilateral and bilateral lenders.

FII holdings are 1% of the total debt, and foreign banks hold negligible quantities of Indian government debt. Debt denominated in foreign currency is 4% of the total. State governments do not issue external debt.

Consequently, the overall debt portfolio is largely insulated from currency risk. A second criterion for sustainability is whether the debt ratio will remain stable. This will be the case, assuming the primary budget deficit, GDP growth rate and real interest rate stay at the same level in the coming years as their respective averages over the last decade.