Public Debt — Structure and Management

5.1 Classification of Public Debt

Internal Debt:

• Market Loans: Government Securities (G-Secs) — dated securities, Treasury Bills (91, 182, 364-day), Cash Management Bills
• Securities Against Small Savings: PPF, NSC, SCSS — government borrows from households via post offices
• Provident Funds: EPF, GPF — mandatory savings lent to government
• Reserve Funds and Deposits: Accumulated surplus of government entities
• Securities Issued to RBI: Monetisation of deficit (printing money)

External Debt:

• Multilateral: World Bank (IBRD + IDA), Asian Development Bank, New Development Bank, Asian Infrastructure Investment Bank
• Bilateral: Government-to-government loans (Japan, Germany, France, USA)
• NRI Bonds: FCNR(B), NRE deposits (mobilised by RBI)
• ECB: External Commercial Borrowings (private sector; counted in external debt statistics)

India's Public Debt Profile (2023-24):

• Total Central Government Debt: Rs 172 lakh crore (84.5% of GDP)
• External debt as % of GDP: 18.8% (low by global standards — most debt is domestic)
• IMF Debt Sustainability Analysis suggests 60% as optimal; India's 84.5% remains elevated but considered manageable given high domestic savings rate

5.2 Debt Management

RBI's Role: The Reserve Bank of India acts as the government's debt manager under Section 21 of the RBI Act. It manages:

• Issuance of government securities (weekly auctions)
• Open Market Operations (OMO) — buys/sells G-Secs to manage liquidity
• Ways and Means Advances (WMA) — short-term credit to government for within-year cash flow mismatches

Debt Management Objective: Minimize cost of borrowing over the long run while maintaining sustainable debt trajectory.

Sinking Fund: Government maintains a Consolidated Sinking Fund and Guarantee Redemption Fund to build reserves for debt repayment.

5.3 Debt Sustainability Concerns

• Interest-GDP ratio: India spends 5.1% of GDP on interest payments — higher than most emerging economies
• Rollover Risk: Large share of short-term debt creates refinancing risk
• State Debt: States' combined debt adds another ~28% of GDP; combined general government debt (Centre + States) ≈ 84.5% of GDP

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