India Flag National Debt

Live India Debt Clock Reflects Surge in Debt-to-GDP Ratio Due to Covid-19


Source: Indian Government Data

Last Updated: June 14, 2024

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In this post, we take a closer look at India’s national debt, how it’s managed, and what types of Indian government securities are on sale.

The National Debt of India

The national debt of India is the money owed by India’s federal government, which is based in New Delhi. The debts of India’s states and local governments are not counted as part of the country’s national debt.

According to the International Monetary Fund, India’s debt-to-GDP ratio was around 89.3% in 2020. This was considered a huge jump due to Covid-19 spending after the country managed to keep the ratio stable at around 70% for almost twenty years.

Who Is in Charge of India’s National Debt?

The ultimate guarantor of India’s national debt is the central Indian government, with the name “Government of India” printed on each bond as the issuer.

India Gate New Delhi
India Gate in New Delhi. Image by Stefan Schmidt-Bilkenroth from Pixabay

In many countries, the government’s finance department/treasury is responsible for issuing bonds and managing debt. However, in India, things are a little different. The Indian national debt is managed by the country’s central bank.

The Reserve Bank of India (RBI) is entirely owned by the Indian central government and it is tasked with managing the national debt and also the money supply. It’s also the country’s lender of last resort.

The RBI operates a series of regional banks, much in the way that the Federal Reserve is organized in the United States.

However, only the RBI’s headquarters in Mumbai issue government securities. The national debt is managed by a bank division, called the Public Debt Office (PDO).

Types of Indian Government Securities

The Reserve Bank of India raises debt for the Government of India through a range of instruments, which the RBI calls “G-Secs”. This term is short for “government securities” and has become common parlance in the Indian financial services community.

The instruments that the PDO issues fall into the following categories:

  • Fixed-Rate Bonds – The interest rate payable does not alter over time.
  • Floating Rate Bonds – The interest rate is expressed as a margin over the national base rate.
  • Zero-Coupon Bonds – Pay no interest but are sold at a discount and redeemed at full face value.
  • Capital-Indexed Bonds – The face value of the bond increases in line with inflation.
  • Inflation-Indexed Bonds – Both the loan amount and the interest are index-linked (since 2013 these bonds have been issued exclusively to the general public).
  • Bonds with Call/ Put Options – The RBI has the right to redeem the bond before maturity (call) or the holder has the right to cash in the bond before maturity (put).
  • Sovereign Gold Bond – Payable in cash, but the value of the bond is linked to the price of gold.
  • Treasury Bills – These are short-term government bonds that mature within a year.
  • Cash Management Bills – Very short-term government bonds with a maturity of fewer than 91 days.

The RBI also issues other debt instruments on behalf of nationalized companies and state and local governments.

How Does the Reserve Bank of India Sell Government Bonds?

Government securities are issued on specific dates of the calendar and in specific sales formats according to the type of security. The schedule is updated and published on the RBI website.

All sales of government securities are conducted through the online trading platform, E-Kuber, which is owned by the RBI and used for the initial offerings of public sector securities.

Another section of the E-Kuber system manages the secondary market for bonds. This is called NDS-OM.

You have to register in order to use E-Kuber. Those people and institutions that have access to the system are called “primary members” (PMs).

Institutions that have the right to buy bonds on behalf of customers are called “primary dealers” (PDs).

Who Holds Indian Debt?

The major holders of Indian bonds, and therefore, the owners of India’s national debt ranked by the magnitude of their holdings is:

  1. Commercial Banks
  2. Insurance Companies
  3. Reserve Bank of India
  4. Provident Funds
  5. Others
  6. Foreign Portfolio Investors
  7. Co-operative Banks
  8. State Governments
  9. Mutual Funds
  10. Institutions
  11. Corporates
  12. Non-Bank PDs

Fun Facts About India’s National Debt

  • You could wrap $1 bills around the Earth 10,219 times with the debt amount.

  • If you lay $1 bills on top of each other they would make a pile 286,698 km, or 178,146 miles high.

  • That's equivalent to 0.75 trips to the Moon.

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