India heading towards debt trap: Omkar Goswami

The country faces the prospect of a debt trap given the spiralling public debt and the ballooning interest burden, according to Confederation of Indian Industry chief economist Dr Omkar Goswami.

Speaking at a post-Budget conference in Mumbai last night, Goswami said the total debt has been rising 15.4 per cent per year since 1991-92 and none of the governments have succeeded in stemming the debt.

The central government's public debt has increased to 42.5 per cent of the gross domestic product in 2001-02 from 32.1 per cent in 1991-92.

He said interest payments as a percentage of revenue receipts will swell to 50.5 per cent in 2002-03 from 41.9 per cent in 1992-93.

Goswami said the fiscal deficit in 2001-2002 will explode by one full percentage point to 5.7 per cent with estimated revenue shortfall of Rs 206.83 billion.

On the 50-basis point cut in interest rate on relief bonds, he said it should be implemented with retrospective effect and not prospective effect.

He was also critical of the way tax benefits under section 88 of the Income Tax Act have been reduced and said the reduction or elimination of tax exemptions should have been attempted when the peak tax rate was reduced to 30 per cent from 40 per cent by the then Finance Minister P Chidambaram.

UNI

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