This IMF red flag may worry Indian investors

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The International Monetary Fund (IMF), stated in a latest press briefing that the Covid-19 pandemic has hurt India and other emerging markets very hard. The priority is to focus on getting the virus under control. There have been very substantial increases in debt ratios globally and similar trend has been seen in the case of India.

The debt ratio at the end of 2019, prior to the pandemic, was 74% of GDP, and at the end of 2020, it is almost 90% of GDP. IMF noted that while this is a very large increase, it is similar to what other emerging markets and advanced economies have experienced.

Going forward, the IMF, in its baseline forecast expects that the debt ratio will gradually come down as the economy recovers. The baseline forecast under the assumption of healthy economic growth in the medium term, sees debt to GDP ratio returning to about 80% over time.

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