Global average debt is projected to remain above pandemic levels for about half the world, so there is a need for countries to see what kind of debt numbers and new principles would incentivise growth, former Finance Commission Chairman NK Singh said Saturday. “Our Prime Minister, at the 90th anniversary of the RBI, spoke of growth stability, but also concerns of growing debt, both public and private. Investor decisions influenced by rating agencies do not look at designated debt, but the Government debt, which in this context concerns the States and the Centre. This would suggest that the global average debt post-pandemic now approaches 100 per cent. It is projected to remain above pandemic levels for about half the world. What kind of debt numbers and new principles would incentivise growth?,” Singh said. At the 90th commemoration function of the Reserve Bank of India on Monday, Prime Minister Narendra Modi had asked the RBI to conduct a study on rising debt levels. “Another trend that has been observed globally in recent years is excessive economic expansion and increasing debt. The private sector debt of many countries has reached up to double their GDP. The debt level of several countries not only affects those countries but also impacts the entire global economy. The Reserve Bank should conduct a study on this matter,” Modi had said. Speaking at the TIOL Kautilya Global and Fiscal Heritage Awards 2023 on Saturday, Singh also said that long-term growth emanates from investments in asset creation infrastructure and it needs to be seen whether such investments should be given a different treatment than one-size-fits-all for determining delivered levels of fiscal deficit. He also stressed on the need to design fiscal rules to secure global compliance. Given the high level of global debt in the post-pandemic world, Singh said the ingredients for fiscal prudence need to combine the virtues of growth with stability. “.we know that, in the end, long-term growth emanates from investments in asset creation infrastructure. Do they deserve a somewhat different treatment than one-size-fits-all in determining delivered levels of fiscal deficit? What would be the ingredients in a post-pandemic world, which combine the virtues of growth with stability?,” he said. Wealth must be won by combining the “virtues of growth with fiscal prudence”, which will be the “heart of a robust macroeconomic framework”, which in turn, will act as a precursor for India's quest to be a developed country, he added. At the event, Professor Jagdish Bhagwati was conferred the Kautilya Global Award, while former Finance Commission Chairman Vijay Kelkar and NK Singh were given the Fiscal Heritage Award. Terming fiscal deficit as a recent philosophy in India, which was earlier referred to as budget deficit, Singh said the adoption of the Sukhamoy Chakravarty Report in 1982, which recommended fiscal deficit for the purpose of reporting, periods of fiscal profligacy invariably resulted in India seeking accommodation from multilateral and bilateral entities. “The fact that growth remained modest contributed to fiscal pressures. Opting to inflate debt in other countries brought other serious growth consequences,” he added. He further said fiscal deficit cannot be talked about without considering revenue and revenue buoyancy. “There is a symbiotic relationship to taxes, tax reform and enhanced rates of economic growth,” he said. Speaking at the same event, former President Ram Nath Kovind said creating adequate fiscal space is of paramount importance to give impetus to our current growth trajectory. Kovind said no nation can prosper without predictability and certainty in the tax architecture and of its economic policies. The fiscal architecture is one of its most important pillars, he said, adding that sound fiscal management attracts both public and private capital and improves the quality of public private partnership.
