What Level of Public Debt Could India Target?

This paper discusses possible medium-term public debt targets for India, based on evidence from the economic literature on prudent levels of public debt and the feasibility for the country to meet a particular target over the next 5-6 years. While recognizing the challenges in determining an appropriate debt target, cross-country analysis and simulations suggest that a debt ratio in the range of 60-65 percent of GDP by 2015/16 might be suitable for India. Such a debt ceiling, while still above the average debt level for emerging markets, is within the range of debt ratios that would provide room for countercyclical fiscal policy and contingent liabilities. It would also send a strong signal of the government''s commitment to fiscal consolidation by making a clear break with the past.Fiscal consolidation;Debt management;Debt sustainability;Public debt;Risk management;fiscal rules, debt target, fiscal policy, government debt, debt ratios, external debt, debt intolerance, debt thresholds, debt reduction, government deficit, taxation, fiscal measures, fiscal responsibility, debt dynamics, debt sustainability analysis, fiscal framework, tax revenue, domestic debt, indebted countries, tax administration, fiscal deficit, fiscal stimulus, currency composition, government revenue, public sector debt, fiscal discipline, aggregate demand, tax base, fiscal stress, fiscal rectitude, debt policy, sovereign debt, tax returns, fiscal space, fiscal management, fiscal stance, debt overhang, debt rescheduling, domestic currency, marginal cost of debt, fiscal deficits, budget constraint, central bank, tax performance, fiscal responsibility frameworks, sovereign defaults, tax burden, budget deficits, debt sustainability analyses, highly indebted countries, government fiscal deficit, fiscal consolidation episodes, government budget constraint, debt defaults, fiscal sustainability, tax reform, currency debt, fiscal prudence, fiscal reform, expenditure reform, medium-term fiscal framework, debt stock, government deficits, level of indebtedness, debt relief, administrative improvements, fiscal responsibility laws, budget management, debt burden, sovereign debt crises, fiscal response, central government fiscal