India’s sovereign rating downgrade by Moody’s Investors Service, although expected, puts the spotlight on a key metric of fiscal health: the debt-to-GDP ratio.
Debt-to-GDP simply put is the amount owed by a country in proportion to what it produces. For every ₹100 of gross domestic product (GDP), India owed ₹72 to the market in fiscal year 2019.
The International Monetary Fund (IMF) expects India’s debt-to-GDP ratio at 74.3 for calendar 2020. Moody’s expects this ratio to worsen to 84% for fiscal year 2020-21.
The covid-19 pandemic would be a big force behind this deterioration. At this level, India fares rather poorly in comparison to most of its emerging market peers.