Govt is very much on the path of long-term macroeconomic stability, with the pace of accumulation of govt debt decreasing in past five years, a CAG review of Fiscal Responsibility and Budget Management (FRBM) Act said. Union govt’s debt declined from 61.38 per cent of GDP in 2020-21 to 57 per cent of GDP by March 2024.
CAG, which tabled its review of FRBM Act for 2023-24 in Parliament on Monday, said govt, in its medium-term fiscal policy statement, has projected limiting the fiscal deficit to below 4.5 per cent of GDP by 2025-26.
The FRBM framework, enforced in July 2004 to ensure long-term macroeconomic stability, mandates that Union govt limit fiscal deficit to 3 per cent of GDP by March 2021, and limit general govt debt to 60 per cent and central debt to 40 per cent of GDP by 2024-2025. It allows CAG to undertake an annual review of the Act.
“Analysis over a five-year period (2019-2024) showed that central govt debt as a percentage of GDP was 61.38 per cent in 2020-21 and consistently declined thereafter, reaching 57 per cent of GDP by the end of March 2024,” CAG noted.
The auditor said that the increase in central debt in absolute terms by 9.98 per cent over 2022-23 was mainly on account of an increase of ₹16.24 lakh crore in internal debt, coupled with an increase of ₹48,000 crore in the current value of external debt, and an increase of ₹57,000 crore in the public account liability during 2023-24.
“Debt sustainability, as measured by the debt stabilisation indicator, was positive in 2023-24 which is a positive indicator towards stability,” the auditor said.
Interest payments to revenue receipts ratio is an important indicator of govt’s fiscal health. The ratio reached its peak at 38.66 per cent in 2020-21, declined to 33.99 per cent in 2021-22, but increased to 35.35 per cent in 2022-23 and 35.72 per cent in 2023-24, CAG said.
