RBI Governor says public debt not a problem yet for India

Mumbai, Mar 2: RBI Governor Raghuram Rajan today said government debt is not yet a problem for India even as Standard & Poor's stated that high government debt is putting the sovereign rating under pressure.

"We are one of the few countries that do not have a huge debt problem as yet," he said, addressing the students of Guru Nanak College in central Mumbai this morning. He said that many European Union countries indulge in excess borrowing.

Raghuram Rajan

Earlier during the day, in a statement issued in the wake of the Budget, global ratings firm S&P said the high government debt is putting the sovereign rating under pressure.

"The debt burden and large budgetary subsidies could constrain the speed of improvements in credit metrics. "The government debt burden and subsidy continue to constrain fiscal flexibility," its credit analyst KimEng Tan said.

Finance Minister Arun Jaitley in the Budget last week raised the fiscal deficit target to 3.9 percent for FY16, against 3.6 percent given earlier in the fiscal consolidation roadmap which had also promised to bring it down to 3 percent by FY17.

Jaitley pushed it back by one year and chose to borrow more to invest an additional Rs 70,000 crore into infrastructure this fiscal. The RBI Governor said in the face of difficulties after the global financial crisis, central banks around the world are printing money and reducing interest rates to very low levels. India is suffering "avalanche" of capital flows because of this on one hand, and is unable to lower interest rates due to high inflation on the other, he said.


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