Rajan says public debt not a problem yet

Says the debt burden and large budgetary subsidies could constrain the speed of improvements in credit metrics

RBI Governor Raghuram Rajan on Monday said government debt is not yet a problem for India even as Standard & Poor's (S&P) 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 in Mumbai .

He said many European Union countries indulge in excess borrowing. Earlier during the day, in a statement issued in the wake of the Budget, global ratings firm S&P said, "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 per cent for FY16, against 3.6 per cent, given earlier in the fiscal consolidation road map which had also promised to bring it down to three 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 for FY15.

On the global growth, he said the US seems to be coming out of the period of slow growth but China is slipping into it.

He also mentioned that the non-performing assets of banks was a problem and the RBI is trying to solve it.

The RBI is still trying to understand the new system of computing gross domestic product (GDP), but a 7.4 per cent GDP expansion makes India one of the fastest growing large economies in the world, he said.

"Lots of good things are happening. Lots of people are coming to India because they see a huge market. I would say there is tremendous economic opportunity for young people. We have the most self-confident, well-trained, even aggressive young Indians in history," he said, asking the students to lap up the opportunity.