Public debt: Do not let it eclipse the fiscal deficit

The Centre's plan to adopt debt as its new focus for budget prudence after 2025-26 does hold merit but we must not lose track of the fiscal gap. It'll remain a valuable economic indicator

- 

In a 2020 address to the nation soon after the outbreak of covid, Prime Minister Narendra Modi cited age-old wisdom that advised against losing control of three things: fire, debt and disease. To cushion India's economy from the pandemic's shock, though, government spending had to vastly exceed its inflows, taking its fiscal deficit to 9% plus of GDP in 2020-21. The reversal of this debt-raising fiscal expansion since then has followed a glide path with 4.5% as the fisc's aim, to be achieved by the next Union budgetfor 2025-26. As no further target for it has been set, the Fiscal Responsibility and Budget Management (FRBM) Act's goal of 3% looks likely to keep gathering dust. Signalling a shift in approach, the last budget revealed an intent to target the level of public debt, rather than the annual fisc, in subsequent years as a way to keep overspending in check. This conforms with the PM's prudent advice of 2020, but what exactly does it imply? Official data on the Centre's debt burden, available till end-September, would place it about halfway between 55% and 60% o