What would be the CIBIL Score of the Indian Government?!

Last Updated on

Did you know that the govenment would collapse if it did not borrow money?! Its expenditure is much more than its income (revenue), aka fiscal deficit. It has borrow considerably sums of money from you and me (diretly or indirectly) to service its debt. Therefore, the government is in a debt trap (which is quite common!).

If a bank is requested to lend money to us, it wants to know how credit-worthy we are or what our CIBIL score is. We lend money to the government all the time – as often as each month (or less). Do we stop to ask, What would be the CIBIL Score of the Indian Government?!

A few days ago, the government of India announced the publication of a consolidated status paper on Government debt, detailing its nature, history, sustainability and outlook.  Here are a few excerpts.

The classification of government Debt




The composition of government debt

Source: Page 26 of the Consolidated Status Paper (link below)


The government debt is predominantly public in nature.

And much of the public debt is internal – by us the citizens.

External debt is comfortably small and therefore our ability to service debt (debt sustainability) is not influenced by currency risk.

Government debt is gradually becoming more and more market linked in nature. This is good for the government since more and more entities will buy government securities making it easier to borrow.

Interest rates of fixed income instruments have also become market linked – at least on paper:Why are PPF and Sukanya Samriddhi interest rates still so high?!

However, the securities have a fixed interest rate with very long maturies (decades!). This is good for both the lender (us) and the borrower(the govt) and provides a shield against rate volatility and roll over risk (borrower has to pay more if rates are high upon maturity). Floating rate securities constitute only 0.4% of internal debt. This is also true for a country like the USA which has a much larger government debt to GDP ratio than India – US is the 1st, India the 10th.

The report notes that insurers and provident funds hold 28% of government securities largely eating into the share held by commercial banks.

Government debt as a percentage of GDP

Source: Page 23 of the Consolidated Status Paper (link below)

There is a marginal decrease in government debt as a percentage of the gross domestic product (GDP). This neither good nor bad. A high debt to GDP ratio does not mean much. What matter is the ability of the government to handle payments. Over the long term, what matters is a good grown in GDP rather than a reduction in debt. The government needs to borrow to develop infrastructure and that is a good thing. The key is that infrastructrue should contribute directly or indirectly to economic growth.

The report also carries a debt sustainbaility analysis which says that the debt situation is stable – primarily because of domestic participation in the fixed income market. I do not understand this well enough to share it here.

When we lend to the government, we often take it for granted that the sum is guaranteed. While this is largely true, it is important for us to recognize that the ability of the government to service debt (pay regular interest and return the principal) depends on its ability to handle fiscal deficit – expenditure which has always been greater than its revenue.

What would be the CIBIL Score of the Indian Government?!

Now where would the needle in this dial point for the government. Not this government, let us leave politicis out of it. Governance is a contiguous process.

Figure adapted for illustation only from https://www.cibil.com/sites/default/files/pdf/understanding-cir-ctc.pdf

As long as the medium-term view of the economy is sound, I am happy to place the needle close to 699-700 border. How about you?


  1. Press release announcing the Consolidated Status Paper
  2. The consolidated status paper
Do share if you found this useful

About the Author M Pattabiraman author of freefincal.comM. Pattabiraman(PhD) is the author and owner of freefincal.com.  He is an associate professor at the Indian Institute of Technology, Madras since Aug 2006. Pattu” as he is popularly known, has co-authored two print-books, You can be rich too with goal based investing (CNBC TV18) and Gamechanger and seven other free e-books on various topics of money management.  He is a patron and co-founder of “Fee-only India” an organisation to promote unbiased, commission-free investment advice. Pattu publishes unbiased, promotion-free research, analysis and holistic money management advice. Freefincal serves more than one million readers a year (2.5 million page views) with numbers based analysis on topical issues and has more than a 100 free calculators on different aspects of insurance and investment analysis. He conducts free money management sessions for corporates  and associations(see details below). Previous engagements include World Bank, RBI, BHEL, Asian Paints, TamilNadu Investors Association etc. Contact information: freefincal {at} Gmail {dot} com (sponsored posts or paid collaborations will not be entertained)
Want to conduct a sales-free "basics of money management" session in your office?
I conduct free seminars to employees or societies. Only the very basics and getting-started steps are discussed (no scary math):For example: How to define financial goals, how to save tax with a clear goal in mind; How to use a credit card for maximum benefit; When to buy a house; How to start investing; where to invest; how to invest for and after retirement etc. depending on the audience. If you are interested, you can contact me: freefincal [at] Gmail [dot] com. I can do the talk via conferencing software, so there is no cost for your company. If you want me to travel, you need to cover my airfare (I live in Chennai)

Connect with us on social media

Content Policy

Freefincal has original unbiased, conflict-of-interest-free,  topical reports, reviews, commentary and analysis on all aspects of personal finance like mutual funds, stocks, insurance etc. All guest authors and contributors to the site also do not have any conflict of interest. If you find the content useful, please consider supporting us by (1) sharing our articles and (2) disabling ad-blockers for our site if you are using one. No promotional content We do not accept sponsored posts and link exchange requests from content writers and agencies. This is our privacy policy Our website is non-profit in nature. The revenue from the advertisement will only be used for hosting charges, domain registration charges, specific plugins necessary for traffic growth and analytics services for search engine optimisation.

Do check out my books

You Can Be Rich Too with Goal-Based Investing

You can be rich too with goal based investingMy first book is meant to help you ask the right questions, seek the right answers and since it comes with nine online calculators, you can also create custom solutions for your lifestyle! Get it now.  It is also available in Kindle format.
Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You WantGamechanger: Forget Start-ups, Join Corporate and Still Live the Rich Life you wantMy second book is meant for young earners to get their basics right from day one! It will also help you travel to exotic places at low cost! Get it or gift it to a young earner

The ultimate guide to travel by Pranav Surya

Travel-Training-Kit-Cover This is a deep dive analysis into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, how travelling slowly is better financially and psychologically with links to the web pages and hand-holding at every step.  Get the pdf for ₹199 (instant download)

Free Apps for your Android Phone

All calculators from our book, “You can be Rich Too” are now available on Google Play!
Install Financial Freedom App! (Google Play Store)
Install Freefincal Retirement Planner App! (Google Play Store)
Find out if you have enough to say "FU" to your employer (Google Play Store)

Blog Comment Policy

Your thoughts are vital to the health of this blog and are the driving force behind the analysis and calculators that you see here. We welcome criticism and differing opinions. I will do my very best to respond to all comments asap. Please do not include hyperlinks or email ids in the comment body. Such comments will be moderated and I reserve the right to delete the entire comment or remove the links before approving them.

1 Comment

  1. Hi, great article. I read recently that cibil identity theft has become common these days. This scares me a lot, is there a way to avoid them?

Leave a Reply

Your email address will not be published. Required fields are marked *