Per Capita Debt

The per capita income may have gone up by 14% during the last financial year, but the debt burden on every Indian — in the form of the government’s debt — went up by 23%, latest official estimates show. According to finance ministry data, the per capita debt in India was estimated at nearly Rs 33,000 at the end of March 2012, compared to a little over Rs 26,600 a year ago, led primarily by internal as well as external loans. This is in addition to the home and auto loans that individuals have taken. While companies as well as governments avail of external loans, internal debt is mainly on account of government borrowings, either from the market or even from individuals in the form of small savings schemes such as the National Savings Certificate or Public Provident Fund. 
Government data shows that the average Indian’s debt of Rs 32,812 is now over half the per capita income at current prices, which was estimated at Rs 60,972. During 2010-11, per capita debt was just short of the 50% mark. A sharper increase in the overall debt stock was on account of high government borrowings to fund a large subsidy bill and compensate for the shortfall in revenue. In case of external debt, the private sector has played a major part as it has resorted to raising foreign loans at a cheaper cost, including the hedging charges. 
Although India’s overall debt position may have come under the lens of ratingagencies, compared to other major economies, the government appears to have a much lower stock of loans. According to IMF’s estimates, total debt as a proportion of GDP is estimated at around 67% for India, which may be the highest among the four BRICS countries but much better than major economies, leave alone the PIGS (Portugal, Ireland, Greece and Spain). 
But a high debt level also comes with a high interest burden. The government has budgeted to pay Rs 2.75 lakh crore, or 18.45% of the total expenditure as interest payments. For long, economists have asked the government to cut down on interest outgo and subsidies so that more resources are available for physical and social infrastructure.