Parl panel calls for coordinated approach to reduce debt to GDP ratio

The Standing Committee on Finance, in its report tabled in Parliament on Wednesday, has called for the adoption of a comprehensive and coordinated approach to monitor and manage general government debt, ensuring that both the central and state governments adhere to prudent fiscal policies.

 

Ajay Seth, secretary, Department of Economic Affairs (DEA), told the panel that the government’s announcement to bring down the debt-to-gross domestic product (GDP) ratio to 50 per cent by 2031 would not be sufficient to reduce the overall general debt in the country, and states, too, would need to lower their debt-to-gross state domestic product (GSDP) ratio.

 

“Our goal is 60 per cent (for general debt-to-GDP). But considering that we are at 80 per cent plus, 60 per cent is far off. First, we should come down to 75 per cent. The states also have to reduce their debt-to-GSDP ratio. So both are needed,” Seth was quoted as saying in the Standing Committee report.

 

The Standing Committee urged the DEA to revisit the existing practice of allocating funds that are not directly related to the department — such as allocations for new schemes that are not finalised.

 

The DEA’s allocation for the ‘new scheme’ was initially earmarked at ₹62,592.88 crore in Budget Estimates 2024-25 but was subsequently reduced to ₹9,068.29 crore at the Revised Estimates 2024-25 stage.

 

“Enhanced forecasting techniques and strategic foresight are essential for improving budgetary projections and minimising fiscal uncertainties,” the panel’s report said.

 

While stressing that the DEA needed to uphold financial discipline and fiscal prudence while making budgetary allocations, the Standing Committee urged the department to set a benchmark of excellence in budgetary planning and execution, serving as a model for other ministries and departments.

 

Emphasising the need for prudence and efficiency in subsidy allocation, the Standing Committee said it was essential that subsidies be targeted towards the most deserving beneficiaries and critical sectors to ensure maximum socio-economic impact.