New Delhi: The Congress on Tuesday attacked the government over its management of the economy, saying that the total debt of the country has gone up by 71 per cent increase in the last five-and-a-half years.
The party said that fiscal deficit was likely to go beyond comfort levels, which will result in development expenditure being curtailed.
Congress spokesperson Gourav Vallabh said in a statement that the total debt in March 2014 was Rs 53.11 lakh crore, which increased to Rs 91.01 lakh crore in September 2019, a 71 per cent increase in 5.5 years.
He said the per capita debt increased by Rs 27,200 in the last 5.5 years.
"Increase in rate of per capita debt (10.3 per cent) is twice vis-a-vis rate of per capita GDP (5.3 per cent) in CAGR (compound annual growth rate) terms.
He said in 2014, the debt component was 43 per cent for every rupee earned and in 2019 it has increased to 48 per cent for every rupee earned.
"In 2010 the national debt to GDP was 65 per cent, which has increased to 69.7 per cent in 2019 and is estimated to increase to 70.1 per cent by March 2020. Going by the lower GDP numbers and a significant decrease in direct and indirect tax revenue, the fiscal deficit is likely to go beyond the comfort levels. This will either result in the Government not spending enough on development activity or overburden itself with further debt thereby putting additional pressure," Vallabh said.
He said the national debt is an important component for managing the finances of the government of any country.
"Debt is generally used to bridge the gap between available reserves and long-term expenditure of the government towards development work. It is very critical for every government to ensure that the total debt is well within the required limits and efficiently used for development activities and to improve the overall standard of living of the people, while also ensuring that the same is used for productive purposes," he said.
Vallabh said an improvement in GDP enables the country to repay the debt well within the period of debt.
The Congress leader said that as the national debt per capita increases, the likelihood of the government defaulting on its debt service obligation increases.
"Therefore the RBI will have to raise the yield on newly issued treasury bonds to attract new investors. This reduces the amount of tax revenue available to spend on other governmental services because more tax revenue will have to be paid out as interest on the national debt. Over time, this shift in expenditures will cause people to experience a lower standard of living, as borrowing for economic enhancement projects becomes more difficult," he said.
Vallabh said the potential increase in bond yields will force the RBI to also "increase the interest rates thus pushing the already battered businesses to further deterioration".
"This will also likely increase the inflation as is happening and purchasing power of people is getting reduced," he said.
Vallabh said the current situation was "a classic situation where growth is depleting very fast while inflation is rearing its ugly head once again".
"More importantly in order to address these types of crunch the Government has to resort to more and more stimulus which will only increase the debt further," he said...
Maintaining that the government has been grappling in paying its obligations, he alleged that the reason for forcing the RBI to dip into its reserves for Rs 1.76 lakh crore was on account of inability to manage its resources.
"The government is likely to again force RBI to pay an additional dividend for the current year since they're already short by over Rs 1.45 lakh crore on account of lower taxes for corporates," he said .
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