Debt obligations and interest on borrowings often form a large part of a government's expenses. But the Centre is likely to see a much higher interest burden in the upcoming fiscal, reported The Economic Times.

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"Interest burden is likely to stay around Rs 9.30 lakh crore for FY23," a finance ministry official told ET.

This is an increase of 15 percent on the Rs 8.1 lakh crore which has been budgeted for interest payments in the current fiscal. The amount is also 16.9 percent higher than the revised estimate for FY21.

"In my estimate, interest (is) to go up by 12-15 percent over the current year," ICRA chief economist Aditi Nayar told ET.

Interest payments are already consuming nearly half of the Centre's yearly revenue. Interest payments stood at 45 percent of the government's total revenue receipts in FY22.

Much of the debt comes from bonds issued by the government. The UPA-era oil bonds cost the government Rs 29,281 crore in interest payouts in the current fiscal year, while the NDA government's banks recapitalisation bonds cost Rs 19,000 crore annually in interest since 2017.

Economic policies from recent years, the government's borrowing during the pandemic, and economic effects of the pandemic are some of the factors which are seeing India's debt balloon. The country is in the process of monetising state assets to make up for the deficit, but the results so far have been lacklustre.

At the same time, rating agencies and economists are citing concerns over India's rising debt obligations.

"(India's) debt affordability will remain relatively weak, with interest payments reaching about 28 percent of general government revenue in 2021, the highest among BAA-rated peers and more than three times the BAA median forecast of around 8 percent," rating agency Moody's had stated in a note last year.

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(Edited by : Thomas Abraham)