IMF praises India for “right policies”, but cautions China over its high debt

Washington: The International Monetary Fund has heaped praises on India for using “the right policies” to lower “quite a high” debt to GDP ratio.
The debt level is relatively high (in India), but the authorities are planning to bring it down over the medium term with the right policies,” Abdel Senhadji, Deputy Director of IMF’s Fiscal Affairs Department said. India’s debt was 70 percent of the GDP in 2017.
The IMF has, however, cautioned China that its overall level of debt is a major challenge and to lower it, Beijing must rethink the sources of revenues for its local bodies which are responsible for 85 per cent of government spending.
“The main concern has to do with the level and pace of accumulation of overall debt, private and public. So the control over the debt level, in particular, the rhythm of debt accumulation is a major challenge for the Chinese economy.”
According to IMF, the global debt reached a record high in 2016 at $164 trillion, or almost 225 percent of global GDP. Though advanced economies account for rise in the exorbitant rise in global debt, but in the last 10 years, IMF says, emerging markets like China have been responsible for most of the increase.
China alone, as per Vitor Gasper, Director of IMF Fiscal Affairs Department, has contributed to 43 percent increase to global debt since 2007. However, the IMF has a good news for India as its economy clocked at $2.6 trillion for 2017. With this, India is now the world’s sixth largest economy, displacing France. Top five economies which are ahead of India are: the US, China, Japan, Germany and the United Kingdom.