Borrowed growth, broken future: The debt burden on India’s poor

By Bhabani Shankar Nayak* 

The Receipt Budget (2025–2026), published by the Budget Division of the Ministry of Finance, Government of India, reveals the scale and structure of India’s debt. As of 31 March 2025, the internal debt and other liabilities of the Government of India amount to ₹175,55,988.60 crore, which is estimated to rise to ₹190,14,852.01 crore by 31 March 2026. Similarly, as of 31 March 2025, the external debt stands at ₹6,18,295.76 crore and is projected to increase to ₹6,63,920.67 crore by 31 March 2026. The combined outstanding internal and external debt and other liabilities of the Government of India are thus estimated to reach ₹196,78,772.68 crore by the end of 2025–2026, compared to ₹181,74,284.36 crore at the end of 2024–2025.

At the current exchange rate, the external debt of the Government of India amounts to ₹185.11 lakh crore for the current financial year and is expected to increase to ₹200.16 lakh crore in the next. Such an enormous volume of debt translates into a growing burden on the Indian working population. Even during the 1991 economic crisis, the per capita public debt was just USD 220 — a historical low. In contrast, per capita public debt has now surged to around USD 5,800 (approximately ₹5 lakh per person). India ranks 102nd among 165 countries in the rise of per capita public debt. The higher the debt increase, the lower the rank.

This debt-driven economy compels people to borrow merely to sustain a credit-led consumption pattern and a consumer-based economy. Consequently, household borrowings have risen by more than 50 percent. This alarming surge in household debt reflects a deeper economic crisis — one fundamentally driven by debt. The Government of India is pushing people into a debt trap by pursuing a trajectory of debt-led growth, which neither qualifies as genuine economic development nor contributes meaningfully to human welfare. Instead, it perpetuates a cycle of indebtedness that undermines the economy and devastates lives and livelihoods across the country.

The government is repaying its debt by raising additional revenue from the GST Compensation Fund. This effectively shifts the debt burden onto the working population, while the super-rich and corporate classes continue to enjoy tax breaks, low rates, and multiple forms of debt relief. As a result, India continues to produce billionaires who control over 40 percent of the nation’s wealth and more than 23 percent of its national income, yet their contribution toward reducing or repaying the national debt remains negligible. Indian billionaires keep accumulating wealth and growing richer, benefiting from significant debt relief even as the country borrows heavily to sustain itself.

India could substantially increase its annual revenue by raising taxes on luxury goods, imposing a wealth tax on the super-rich, and introducing an inheritance tax on property-owning classes. These measures could help reduce the national debt burden. The nationalisation of natural resources offers another potential strategy to mobilise revenue and curb debt growth. Yet none of these options figure among the government’s policy priorities. Instead, the state functions like a funnel — collecting revenue from the poor by taxing their everyday lives, while protecting and expanding the wealth of the rich. The working masses bear the brunt of taxation, whereas billionaires and corporations often evade taxes or pay minimal amounts. Moreover, corporations receive a substantial portion of their tax contributions back through various incentives and reliefs, while the poor continue to suffer from a lack of basic amenities such as drinking water, healthcare, and educational infrastructure.

The scale of internal and external debt is not only slowing India’s economic growth and development but is also creating a potential debt trap. This trap generates widespread poverty, unemployment, hunger, homelessness, and other forms of economic and social marginalisation. It exerts inflationary pressure on both household budgets and the national economy. A deepening debt trap aggravates the crisis by disempowering people and weakening their capacity to participate meaningfully in the economy. The growing cycle of borrowing and its escalating costs represent an economic disaster in the making. Debt-driven growth fundamentally undermines human welfare, as mounting liabilities restrict the government’s ability to invest in essential areas such as education, healthcare, employment generation, and income enhancement.

Debt-driven growth and development create a hallucination of progress. In reality, such a model drains real revenue, savings, and working capital in the service of debt, eroding the very foundations necessary for the development and empowerment of citizens. This illusion of debt-led development is not a genuine path to progress; it is a recipe for crisis that undermines the nation and the potential of its people. The story of India’s economic growth and human development cannot be built on borrowed money. Debt-driven development reflects a deeper structural crisis confronting the nation — one that threatens its trajectory toward prosperity.

The dream of a developed India cannot be built on debt and economically weakened citizens. Therefore, it is imperative to shift away from a fictitious, debt-dependent economy toward one grounded in agriculture, industry, and services — an economy that prioritises the needs and aspirations of its people over the interests of market forces.

---

*Academic based in UK