India’s total liabilities increased to Rs 201.17 lakh crore in FY26 (provisional), marking an 8% rise from Rs 185 lakh crore in FY25. Despite this increase, the Center asserts that the country’s public debt remains sustainably managed, buoyed by a decreasing debt-to-GDP ratio and increasing government revenues, which have helped cover the growing interest payments.
Minister of State for Finance Pankaj Chaudhary stated that the debt-to-GDP ratio has been decreasing since the COVID-19 pandemic, reflecting the fiscal sustainability of public debt. He also mentioned that increasing revenue receipts have allowed the government to manage interest payments in a sustainable way.
Of the total Rs 201 lakh crore, public debt accounted for the overwhelming bulk, at Rs 183.43 lakh crore, or 91.2% of total liabilities. Within public debt, internal debt accounted for ₹173.55 lakh crore, while external debt, valued at the current exchange rate, added a further ₹9.89 lakh crore to public debt.
Data furnished by the Finance Ministry showed that interest payments increased steadily over the past five years, rising from Rs 8.05 lakh crore in FY22 to Rs 12.43 lakh crore in FY26.
The fiscal deficit, however, has moderated over the years. It stood at Rs 15.19 lakh crore in FY26 (provisional), compared with Rs 17.38 lakh crore in FY23 and Rs 15.85 lakh crore in FY22. The government stated that it has implemented measures to better utilize available fiscal space by focusing on spending in sectors that promote socio-economic development and growth. Consequently, the proportion of effective capital expenditure in the total budget has risen from 18.7% in FY21 to 27.2% in FY26.
For FY27, the government has allocated an effective capital expenditure of Rs 17.15 lakh crore, surpassing the fiscal deficit estimate of Rs 16.96 lakh crore. The Finance Ministry states that this highlights the government’s emphasis on productive investments while maintaining a sustainable debt-to-GDP ratio.
General government debt represents the total gross debt of the government as a percentage of GDP. It includes liabilities such as currency and deposits, debt securities and loans, insurance, pensions, standardized guarantee schemes, and other accounts payable, where applicable. This measure is a crucial indicator of government financial sustainability, with fluctuations mainly driven by previous deficits. This indicator is measured as a percentage of GDP.
A high debt-to-GDP ratio is undesirable for a nation, as a higher ratio demonstrates an increased risk of default. In a World Bank study, a ratio exceeding 77% for an extended period may adversely affect economic growth.
The United States ranks second only to Japan in debt as a percentage of GDP. Japan has the world’s largest debt-to-GDP ratio, with government debt more than twice its GDP.
