Union Budget 2024: Explaining Government's Debt Position

As the centre is set to present its interim Budget 2024 on Thursday, here is a look at the total debt, including internal and external debts, of the Union Government to understand the state of finances. Writes Krishnanand.

New Delhi:Usually, the finance minister’s tax proposals, welfare schemes and allocation for different sectors such as road and transport, health, education, women and child development, as highlighted in the budget speech, draw the maximum attention but policymakers and economists also look at some numbers that clearly reflect the health of Union government finances but often do not receive that much attention.

One of these crucial numbers is the total debt of the Union Government and its interest payment liabilities which form the part of Annual Financial Statement (AFS), which is the constitutional term for the Union Budget under Article 112 of the Constitution of India.

Public Debt of India

While the major head number 6001 in the Annual Financial Statement (AFS) gives the details of the total internal debt of the Central government, major head number 6002 gives the details of the external debt of the Central government. Both of these together form the details of public debt, a debt that the people of India owe to lenders and which is guaranteed for repayment as per the sovereign guarantee of the Government of India.

Sometimes, some economists and policymakers also include the debt of the state governments as well to arrive at the figure of public debt, the total money owed by the people of India but the public debt in the budget documents only deals with the details of internal and external loans and advances taken by the Central government which form the part of Annual Financial Statement (AFS) presented to the Lok Sabha under Article 112 of the Constitution.

As per the information given in the budget documents, the Central government had an internal debt of over Rs 81.62 lakh crore in the FY 2021-22 (actual), which increased to over Rs 88.8 lakh crore in the FY 2022-23 as per the revised estimates and for the current financial year, it is expected to increase to over 105 lakh crore as per the budget estimates for the current financial year, which is a record.

However, the external debt of the Central government was over Rs 86,000 crore in FY 2021-22 (actual) which is expected to marginally decline to in the range of around Rs 85,000 crore in FY 2022-23 and FY 2023-24.

The total internal and external debt (public debt) of the Union government was around Rs 82.5 lakh crore in the FY 2021-22 (actual), which increased to nearly Rs 90 lakh crore in the FY 2022-23 (revised estimates) and is expected to go up to over Rs 106 lakh crore in the current financial year.

Low level of external debt

Internal debt on the central government forms the bulk of the total debt on the Central government as over the decades successive governments have followed a conscious approach to keep the external debt on the Central government at a low level of the total debt on the Central government. For example, at Rs 85,000 crore, the external debt is less than 0.8 per cent of the total public debt of the Central government.

Sources of internal debt

Internal debt on the Central government forms the bulk of the total debt on the Central Government, as per the budget documents it is more than 99 per cent of the total debt of the Centre for the current financial year. There are various sources of internal debt on the Central government such as securities against small savings, market loans, cash management bills, ways and means advances and also by issuing special securities to public sector banks.

Securities against small savings has emerged as one of the main sources of the central government’s internal debt. For example, securities against small savings accounted for a borrowing of over Rs 6.38 lakh crore in FY 2021-22 (actual), which marginally declined to over Rs 5.76 lakh crore in FY 2022-23 (revised estimates) and is expected to be over Rs 6.48 lakh crore in FY 2023-24 (budget estimates).

However, market loans short tenure treasury bills (T-Bills) for the bulk of market loans. For example, the information provided under the heading of switching of securities, 14-day treasury bills accounted for more than half of the total internal debt of the Central government in FY 2021-22 as they alone accounted for Rs 44.32 lakh crore of the total internal debt of Rs 81.62 lakh crore in that year.

For the last financial year, the share of 14-day T-bills in the total internal debt of the Centre has been estimated at nearly Rs 50 lakh crore as per the revised estimates and for the current financial year, the share of 14 days T-bills has been estimated at over Rs 58 lakh crore, which is more than half of the total internal debt of the Central government which has been estimated at over Rs 105 lakh crore as per the budget estimates.

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