For the first time in recent history, India's net borrowing program is expected to be lower than in the previous three years. This is a significant fiscal development, as it reflects better debt management and efforts toward fiscal consolidation. The declining trend in net borrowings should ideally be a positive signal for global rating agencies, which have historically been conservative in upgrading India’s credit ratings.
Borrowing Trends: A Shift in Fiscal Management
The government's borrowing data over the last five years indicates a noteworthy decline in net borrowing:
| Fiscal Year | Gross Borrowing (₹ Cr) | Maturity (₹ Cr) | Net Borrowing (₹ Cr) |
|---|---|---|---|
| FY22 | 11,274 | 2,643 | 8,631 |
| FY23 | 14,210 | 3,127 | 11,083 |
| FY24 | 15,430 | 4,401 | 11,029 |
| FY25 | 14,007 | 3,614 | 10,393 |
| FY26 | 14,820 | 3,957 | 10,863 |
Key Observations:
Net borrowing peaked in FY23 at ₹11,083 crore and remained high in FY24 at ₹11,029 crore.
FY25 shows a decline to ₹10,393 crore, marking a shift toward fiscal prudence.
Even in FY26, net borrowing remains lower (₹10,863 crore) compared to FY23 and FY24, highlighting improved debt sustainability.
Potential Impact on India's Credit Rating
India has long pushed for fairer sovereign credit ratings, arguing that its economic resilience and strong growth are not fully reflected in its ratings by agencies like Moody’s, S&P, and Fitch. The decline in net borrowings should ideally influence rating agencies in several ways:
Reduced Fiscal Deficit Concerns: Lower net borrowing suggests the government is actively managing its debt rather than continuously adding to it.
Improved Debt Sustainability: The ability to meet past debt obligations without excessive new borrowing strengthens India's fiscal position.
Boost in Investor Confidence: A better credit rating reduces borrowing costs and attracts foreign investments.
The Need for Fair and Transparent Credit Ratings
Despite India’s strong economic growth and fiscal prudence, rating agencies have remained cautious in upgrading its credit score. The recent borrowing trends demonstrate that India is taking tangible steps to manage its debt better, and it is now time for credit rating agencies to reassess their stance.
India’s fiscal strategy is clearly shifting towards sustainable debt management, with net borrowings on a declining trend. This change should be acknowledged by global rating agencies to ensure fair assessments of India’s creditworthiness. If the fiscal discipline continues, it could lead to lower borrowing costs, stronger investor confidence, and long-term economic stability.
Disclaimer
This article is for informational purposes only. It does not constitute financial or investment advice. Readers should conduct their own research or consult financial professionals before making investment decisions. The opinions expressed are solely those of the author and do not represent any financial institution or government entity.