Public Debt Dynamics and Fiscal Sustainability in India

Authors

  •   Biyaso Ram Ph.D. Research Scholar, Centre for Economic Studies and Planning (CESP), Jawaharlal Nehru University (JNU), New Delhi - 110 067 ORCID logo https://orcid.org/0000-0001-6418-9656
  •   Shakti Kumar Professor (Corresponding author), Centre for Economic Studies and Planning (CESP), Jawaharlal Nehru University (JNU), New Delhi - 110 067

DOI:

https://doi.org/10.17010/ijf/2026/v20i7/176064

Keywords:

public debt, debt-to-GDP ratio, debt sustainability, FRF, indicator-based approach.
JEL Classification Codes :C22, C32, E62, H62, H63
Publication Chronology: Paper Submission Date : August 25, 2025 ; Paper sent back for Revision : May 21, 2026 ; Paper Acceptance Date : June 20, 2026 ; Paper Published Online : July 15, 2026.

Abstract

Purpose : This study aimed to investigate the trends and sustainability of public debt in India from 1980 to 2022.

Design/Methodology/Approach : A moving average and graphical approach were employed to capture the trend in India’s internal, external, and total debt. The fiscal reaction function (FRF) and indicators-based approach were applied to examine the sustainability of public debt under the autoregressive distributed lag model.

Findings : The graphical and moving average results indicated that India’s overall public debt-to-GDP ratio increased over the study period. A significant decline was observed in the external debt-to-GDP ratio, particularly after the 1991 economic reforms. In contrast, the internal debt-to-GDP ratio indicated an upward trend. The indicator-based approaches showed mixed results. The FRF results indicated that during the study period, public debt in India remained sustainable due to a favorable interest-growth differential rather than a positive primary balance.

Practical Implications : The findings of the present study improved the understanding of public debt behavior and sustainability concerns in India.

Originality/Value : This study contributed to the literature by conducting trend analysis of public debt and debt components and sustainability, examined through an indicator-based approach and the FRF. It made a valuable contribution to the literature on public debt trends and sustainability, using a theoretical and empirical methodological framework. Additionally, it explored how macroeconomic variables over the five phases of the study period determined debt sustainability in India.

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Published

2026-07-15

How to Cite

Ram, B., & Kumar, S. (2026). Public Debt Dynamics and Fiscal Sustainability in India. Indian Journal of Finance, 20(7), 26–43. https://doi.org/10.17010/ijf/2026/v20i7/176064

Issue

Volume 20, Issue 7, July 2026

Section

Articles
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