🇮🇳 RMN India Debt Report 2025: A State-Wise Analysis of India’s Mounting Public Debt and Fiscal Irresponsibility

This article is part of the ongoing RMN States Monitor series — an independent, data-driven assessment of Indian states by RMN News.

📊 Executive Summary

India’s public debt continues to rise, with the Union government and individual states borrowing heavily to meet expenditure commitments. The RMN India Debt Report 2025 presents a consolidated analysis of the country’s debt trends, state-wise debt burdens, primary lenders, and growing concerns around debt sustainability. The report also sheds light on the use/misuse of public borrowing, particularly in the form of pre-election populist promises such as free electricity and subsidies.

📈 India’s Public Debt at a Glance

Year	Total Public Debt (₹ Lakh Crore)	Debt as % of GDP
2019–20	101.3	48.0%
2020–21	120.9	60.0%
2021–22	135.9	58.0%
2022–23	147.2	56.2%
2023–24 (Est.)	159.4	55.1%

Sources: RBI, Union Budget, IMF estimates

🇮🇳 India’s External Debt (2018–2025)

This section provides an overview of India’s external debt trends over the past several years, highlighting key metrics such as total debt, debt-to-GDP ratio, and the composition of external borrowings.

Year	Total External Debt (US$ Billion)	External Debt-to-GDP Ratio (%)
2018	529.3	20.1%
2019	543.1	19.9%
2020	558.4	20.9%
2021	573.7	21.2%
2024	663.8	18.7%
2025	717.9	18.7%

📊 Debt Composition and Insights (2024–2025)

• Short-Term Debt (2025): ~US$ 134.3 billion
• Long-Term Debt (2024): US$ 541.2 billion
• Currency Breakdown (2024): USD (53.8%), INR (31.5%), JPY (5.8%), SDR (5.4%), EUR (2.8%)
• Short-Term Debt to Forex Reserves (2024): 19.0%
• Debt Service Ratio (2024): 6.7% of current receipts
• Major Borrowing Sources: Commercial Borrowings (31.3%), NRI Deposits (19.4%)

The data indicates a consistent increase in India’s external debt, with a stable debt-to-GDP ratio despite the rising debt burden. This suggests that debt levels have grown in tandem with GDP. However, the growing reliance on short-term debt and commercial borrowings necessitates careful monitoring to maintain financial stability and foreign exchange liquidity.

Sources: Reserve Bank of India (RBI), Ministry of Finance, Government of India

📌 Top Indian States by Debt-to-GSDP Ratio (2023–24)

State	Debt-to-GSDP Ratio (%)	Total Outstanding Debt (₹ Crore)
Punjab	47.6%	3,20,000
Rajasthan	42.3%	4,60,000
West Bengal	39.9%	5,60,000
Bihar	38.5%	3,00,000
Andhra Pradesh	37.2%	4,20,000
Kerala	36.7%	3,60,000
Uttar Pradesh	35.1%	6,00,000
Haryana	34.8%	2,20,000
Tamil Nadu	34.5%	6,30,000
Maharashtra	19.6%	7,10,000

Sources: RBI State Finances Report, State Budgets 2023–24

💸 Key Lending Agencies

• Reserve Bank of India (market borrowing through bonds)
• World Bank and Asian Development Bank (external loans)
• National Bank for Agriculture and Rural Development (NABARD)
• LIC, commercial banks, and small savings funds

⚠️ Freebies and Fiscal Irresponsibility

Several states with dangerously high debt levels continue to announce unsustainable welfare schemes, including:

• Free electricity, water, or transport
• Cash subsidies without productivity link
• Loan waivers with no systemic reforms

These measures, while politically attractive, increase the risk of fiscal slippage and poor creditworthiness.

🔍 Conclusions and Recommendations

• States must align debt management with long-term fiscal sustainability.
• Freebies should be replaced with targeted and performance-linked support systems.
• Central and State governments should make debt data transparent and publicly accessible.
• Independent fiscal watchdogs and audits should be strengthened.

📘 Key Fiscal Terms Explained

📊 Debt-to-GDP Ratio

The Debt-to-GDP ratio compares a country’s total debt to its Gross Domestic Product (GDP), offering insight into the government’s ability to repay its borrowings.

Formula: (Total Debt ÷ GDP) × 100

A high ratio may indicate potential fiscal stress, while a lower ratio signals stronger economic control. India’s combined debt-to-GDP ratio (Union + States) has remained around 83% in recent years.

🏛️ Debt-to-GSDP Ratio

The Debt-to-GSDP ratio is the state-level equivalent of the national debt-to-GDP ratio. It measures how much debt a state government owes in relation to its Gross State Domestic Product (GSDP).

Formula: (State Debt ÷ GSDP) × 100

This ratio helps assess the financial health of Indian states. A higher debt-to-GSDP ratio can limit a state’s ability to invest in public services and development.

💸 Fiscal Deficit

The Fiscal Deficit is the gap between the government’s total revenue (excluding borrowings) and its total expenditure. It indicates how much the government needs to borrow to meet its expenses.

Formula: Total Expenditure – Total Receipts (excluding borrowings)

A high fiscal deficit can lead to increased borrowing, raising the debt burden. The Indian government has set targets to reduce the fiscal deficit as a percentage of GDP in its fiscal roadmap.

📉 Primary Deficit

The Primary Deficit represents the fiscal deficit minus interest payments on previous borrowings. It reflects the government’s current borrowing requirements excluding past debt obligations.

Formula: Fiscal Deficit – Interest Payments

A positive primary deficit indicates continued dependence on borrowings for current spending, whereas a primary surplus suggests greater fiscal sustainability.

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This section is intended to improve public understanding of India’s debt position by clarifying key financial terms used in the RMN India Debt Report 2025.

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📌 Disclaimer

All care has been taken to compile the data and rankings in this article from reliable and reputable sources, including the RBI, Union Budget documents, and official State Budgets. However, readers are advised to verify the findings independently and consult additional resources before making decisions based on this information.