India’s Mounting Debt: A Looming Threat to Our Future

India’s Mounting Debt: A Looming Threat to Our Future

By investing borrowed money into areas that foster long-term growth, such as creating jobs, nurturing industries, promoting innovation, and providing quality education, India can not only repay its debts but also strengthen as a nation.

By Imrana

India’s rising national debt is not merely an economic issue but a critical concern for the nation’s future, impacting everything from jobs and education to healthcare. While borrowing is a common practice for governments, even in affluent nations like the United States with its over $37 trillion national debt, the true problem lies in how these borrowed funds are utilized.

The Core Issue: Mismanagement of Borrowed Funds: Borrowing money can be beneficial when invested in long-term growth initiatives such as building highways, improving schools, strengthening healthcare, or funding clean energy projects. However, in India, a significant portion of borrowed money is reportedly being used to repay old loans or finance short-term political initiatives like free electricity schemes or loan waivers.

These measures, while potentially winning votes, do not foster lasting development. This pattern of borrowing merely to “patch holes” instead of building for the future creates a perilous cycle of debt. As interest payments climb, governments are often compelled to reduce spending in vital sectors like education and healthcare.

Warnings from the United Nations: This issue is not unique to India, as global leaders recently discussed it at the United Nations Financing for Development Forum (FFD4). A UN report highlighted that many developing countries are dedicating more funds to debt payments than to essential public services such as health or education.

The UN Secretary-General has warned that debt is transitioning from a “tool for development into a trap,” particularly when not managed effectively. If this trend persists, it could exacerbate inequality, lead to the collapse of public services, and limit future opportunities for young people. Sadly, India is also perceived to be “on this path”.

The Burden of Debt Without Growth: India’s total government debt surpassed ₹155 lakh crore in 2024, a substantial burden that will be carried by its citizens, especially if funds are not used wisely. When borrowing occurs without corresponding increases in productivity, innovation, or employment, repaying these loans becomes increasingly difficult. A large portion of the government budget being consumed by interest payments means less funding for crucial areas that impact ordinary people:

• Schools lack proper funding.
• Roads remain in disrepair.
• Government hospitals face shortages.
• Public sector jobs diminish.
• Support for startups and industries is reduced. This ultimately hinders national development and jeopardizes future prospects.

Learning from Developed Nations: While countries like the U.S., Japan, and the U.K. carry immense debts, they typically borrow for long-term national growth investments. Their economies are robust enough to manage repayments, and they benefit from stable governance, strong institutions, and greater transparency in public spending. Despite imperfections, their systems generally feature better monitoring, increased accountability, and clear strategic planning behind borrowing. These are areas India needs to prioritize.

Strategies for Responsible Debt Management: India doesn’t need to cease borrowing entirely but must adopt more responsible practices. Key recommendations include:

• Transparency: Ensuring every borrowed rupee is accounted for and publicly disclosed.
• Smart Spending: Investing in critical areas like infrastructure, digital systems, green energy, and education, rather than solely on election-related “freebies”.
• Strict Accountability: Implementing real legal consequences for the misuse of public funds.
• Global Learning: Studying successful debt management strategies from developed nations and adapting them to India’s unique context.

By investing borrowed money into areas that foster long-term growth, such as creating jobs, nurturing industries, promoting innovation, and providing quality education, India can not only repay its debts but also strengthen as a nation.

Why This Matters to Every Citizen: As citizens, particularly students and young people, we may not directly influence national budgets, but we will live with the consequences of current decisions. Careless use of government funds today could compromise future access to quality education, healthcare, and career opportunities. If policies continue to prioritize short-term gains, the youth will bear the cost.

Ultimately, irresponsible borrowing, rather than debt itself, is the real challenge. India possesses immense potential, including a talented, creative, energetic, and ambitious youth. However, this potential is at risk of being squandered if it is buried under debt that fails to generate growth. The need is for leaders who plan strategically and borrow wisely, investing in an inclusive future, alongside informed and vocal citizens who demand accountability. This issue is about shaping the kind of future we collectively desire to live in.

This consultative article was written by Imrana, a student specializing in business, trade, education, technology, entertainment, and politics, who also produces the ‘Imrana’s Insight podcast’.