India’s public debt ratio to fall to 75.1% of GDP by FY32, only major emerging economy set for a decline: RBI DG

India is the only emerging market economy among nine countries with a gross domestic product (GDP) of more than $1 trillion that is projected to reduce its public debt-to-GDP ratio between 2025 and 2031, Reserve Bank of India (RBI) Deputy Governor Poonam Gupta said on Wednesday.

India’s general government debt is projected to decline from 84.3% of GDP in 2025-26 to 75.1% in 2031-32, according to Gupta’s address at the Business Standard BFSI Insight Summit. The projection comes at a time when public debt is expected to rise across most major economies, limiting governments’ ability to respond to future economic shocks.

The other eight emerging market economies with GDP above $1 trillion covered in the assessment are Brazil, China, Indonesia, Mexico, Poland, Russia, Saudi Arabia and Türkiye. India is the only country in this group whose debt ratio is projected to fall over the period, Gupta said, citing the International Monetary Fund’s (IMF) October 2026 data.

The projected decline reflects the gap between India’s nominal economic growth and the effective interest rate on government debt, alongside fiscal consolidation.

Nominal GDP growth is projected to average about 11% a year through 2031-32, compared with an effective interest rate of around 7% on government debt. This favourable differential helps reduce the debt-to-GDP ratio even as the government continues to run a primary deficit, Gupta said.

A primary deficit occurs when government expenditure, excluding interest payments, exceeds its revenue. India’s primary deficit is projected to remain between 1.7% and 2.2% of GDP, according to the RBI deputy governor’s address.

India’s general government deficit has also narrowed, declining from 9.2% of GDP in 2022-23 to 7.4% in 2025-26, Gupta said. The general government measure covers the Centre and state governments, rather than the central government alone.

The composition of public debt also limits some of the risks associated with high borrowing. Most of India’s public debt is long-term, denominated in domestic currency and held within the country, including by institutional investors. These factors reduce the risk of the government struggling to refinance maturing debt, Gupta said.

The outlook is based on projections, however, and will depend on economic growth, borrowing costs and the pace of fiscal consolidation over the coming years.

The projected trajectory for India contrasts with the broader global outlook. Global public debt stood at 94% of GDP in 2025 and is projected to exceed 100% in 2030, reaching nearly 102% in 2031, according to the IMF data cited by Gupta.

Debt ratios are projected to rise in both advanced economies and emerging market and developing economies. For advanced economies, the ratio is expected to increase from 108% of GDP in 2025 to 115% in 2031. For emerging market and developing economies, it is projected to rise from about 74% to 84% over the same period.

Higher debt and borrowing costs can leave governments with less room to respond to another economic shock. Gupta noted that 119 of the 190 economies for which comparable data were available had a higher debt-to-GDP ratio in 2025 than in 2019.

India’s fiscal consolidation has coincided with a higher share of spending on capital expenditure. General government capital expenditure increased from about 13% of total expenditure in 2020-21 to nearly 20% in 2025-26, according to the address. It also rose from about 4% of GDP in 2019-20 to 5.8% in 2025-26.

Gupta said higher capital expenditure can support debt sustainability by encouraging private investment and lifting the economy’s growth potential.

The IMF’s October 2026 World Economic Outlook also highlighted fiscal vulnerabilities as a risk to the global outlook and called for governments to rebuild fiscal space.

Kirti jha

Kirti Jha is a Senior Content Producer at Mint, where she writes on mutual funds, taxation, personal finance and macroeconomic developments. Her reporting focuses on helping readers understand complex financial developments through data-driven, research-backed stories that explain how policy changes, market trends and regulatory decisions affect investors and households. <br><br> Before joining Mint, Kirti worked at ET Money, where she specialised in mutual fund research and investment analysis. She tracked portfolio disclosures, fund manager strategies, sectoral allocation shifts and investment trends, distilling large datasets into investor-focused insights. Her work combined quantitative analysis with consumer-centric storytelling, enabling readers to better understand fund positioning, portfolio changes and long-term investment opportunities.<br><br> Kirti holds a Bachelor's degree in Economics from Indraprastha College for Women, University of Delhi, and a Master's in Finance from the Jindal School of Banking & Finance at O.P. Jindal Global University. Her academic training emphasised analytical thinking, quantitative research and financial decision-making, providing a strong foundation in understanding capital markets, financial systems and economic policy. With a combined experience in investment research and financial journalism, she is committed to producing accurate, accessible and insightful journalism that empowers readers to make well-informed financial decisions.

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