Public debt in India - II

The security level analysis shows that the large contribution of nominal returns poses a potential risk for unstable debt-GDP dynamics in India

Public debt sustainability is the ability of a government to maintain credible public finances that are serviceable and can support robust economic growth in the long run. In part one of this two-part series, we had emphasised that the large contribution of nominal interests pose a challenge to debt management in India. One problem with using aggregate data on public debt means that we can’t exploit the maturity structure of debt and its impact on the interest rate component. It should be pointed out however that any debt-decomposition analysis using aggregate debt has an important drawback: It leaves