The government will focus more on debt management compared to its present focus on fiscal deficit for the next few years, as there is a “huge overhang of public debt”, Economic Affairs Secretary Subhash Chandra Garg said on Saturday. Talking at the Annual General Meeting of the Federation of Indian Chambers of Commerce and Industry (FICCI) here, he noted that credit rating agencies give significant weight to the debt-to-GDP ratio of a country.
By comparing what a country had with what it produces, the debt-to-GDP ratio indicates its ability to pay back its debts. Currently, India’s debt-to-GDP ratio is around 70 percent.
“We still have an overhang of a very large debt, of public debt especially. Maybe in the next four to five years, that is the area we will aim. Most credit rating agencies and otherwise give a lot of weight to the debt-to-GDP ratio in the country.
“We aim more on the fiscal deficit currently, but going forward that (public debt) is the area that we will focus,” the Secretary said.
The fiscal deficit of the country, he said is close to 3 percent, a level taken to be reasonably ideal.
On the inflation rate, he saw that India has “more or less conquered” rise in prices.
“Things can go wrong reason being of external factors, like oil which we don’t have in our control. But I think we are reasonably assured that inflation is less of a worry going forward.”
Speaking about the country’s economic situation, Garg said the number of people engaged in the agriculture sector should come down to around 10 percent for the country to prosper.
“We have so much or so many people still trapped in agriculture. Any economy where 55 or 65 percent of the people are dependent on agriculture is not going to be wide, rich and prosperous. Globally now, agriculture mostly employs only about 5 or 6 percent of the people.
“I don’t think more than 10 percent of India’s population should remain employed in agriculture,” he said.
The government will have to plan and ensure that farmers and agriculture laborers shift to the services and manufacturing sectors, along with the new digital economy.
Talking to reporters on the sidelines, Garg, who is also an RBI Board member, said that the Reserve Bank’s Board meeting held on Friday discussed on the apex bank’s governance structure, liquidity and credit issues, among others.
The Secretary further said that the meeting did not discuss the issue of RBI’s economic capital framework and interim dividend.