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It should be noted that India is one of the most indebted nations amongst all the major economies. And this is certainly not a statistic to be proud of. High levels of debt as compared to GDP forces an economy into a vicious cycle where a substantial portion of the revenues earned by the Government goes towards interest payment. This leaves little room for spending on developmental activities, which in turn hurts economic growth thus forcing the Government to borrow even more and in this way, the cycle continues, which could eventually lead to a sovereign default or hyperinflation. Thus, the FM's announcement that it would stick to the recommendations of the Thirteenth Finance Commission of reducing debt to GDP ratio to 45% by FY15 was indeed a welcome move.
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