India’s fiscal deficit has been a concern for policymakers. To address this, the government can adopt strategic borrowing techniques. By issuing long-term bonds, the government can reduce its reliance on short-term debt. This approach can help lower the cost of borrowing and minimize the risk of debt rollover.
For instance, in 2022, the government issued a 10-year bond with a yield of 6.5%. This move helped reduce the fiscal deficit by 0.5% of GDP. Furthermore, the government can also consider issuing infrastructure bonds to finance large-scale projects.
This can help stimulate economic growth while keeping the fiscal deficit in check. With a strategic borrowing plan, India can narrow its fiscal deficit and achieve long-term fiscal sustainability.