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QUES: What are the challenges in the public debt management in 2023-24? Explain the strategies adopted by RBI for managing government debts in 2023-24. ANS: In the fiscal year 2023-24, India's public debt management encountered significant hurdles due to elevated market borrowings, market instability, and evolving economic circumstances. According to Statista, India's government net debt is projected to reach nearly 254 trillion INR in 2024, up from 150 trillion rupees in 2020, presenting a challenge to the country's economic expansion. The following outlines some of the challenges in public debt management and the strategies employed by the Reserve Bank of India (RBI). Challenges Related to Public Debt Management: 1. HIGH DEBT-TO-GDP RATIO: India's public debt-to-GDP ratio stood at 57.1% after March 2023. - A high-ratio constrains the fiscal leeway for the government to respond to shocks and amplifies the risk of debt distress and default. 2. HIGH-MARKET BORROWINGS: The central government's gross market borrowings through dated G-sec witnessed an 8.6% increase, and net market borrowings through G-sec and T-bills rose by 4.5% compared to the previous year. 3. STATE GOVERNMENT DEBT MANAGEMENT: The exclusion of most states from the National Small Saving Funds financing facility resulted in escalated market borrowings. - The proportion of market borrowings in funding the gross fiscal deficit of states climbed to 76.1% from 72.4% the previous year. 4. VOLATILITY IN FINANCIAL MARKET: Geopolitical tensions and market instability create an uncertain environment for debt management. 5. INTEREST RATES FLUCTUATION: Escalating interest payments diminish the resources available for other priority sectors like health, education, and infrastructure, and augment the reliance on borrowing to fund the fiscal deficit. - In India, interest payments comprise 20% of the Centre's total expenditure. 6. LACK OF PUBLIC-DEBT AGENCY: The Public Debt Management Cell, an interim arrangement tasked with overseeing the public debt portfolios of both the central and state governments, as well as other public entities, remains in place despite recommendations for the establishment in 2017. Strategies by RBI: a. EXECUTION AND SCALE: The RBI effectively managed combined gross market borrowings for the central and state governments amounting to 25.5 lakh INR, a 17% increase over the previous year. b. DEBT CONSOLIDATION: The RBI executed switches from short-term government securities to long-term ones. In 2023-24, switches worth ₹1.03 lakh crore were completed. - Reissuances and switch operations facilitate passive consolidation. d. FOR STATE GOVERNMENTS: RBI conducted numerous capacity-building programs to educate state governments on prudent cash and debt management practices. - A two-day program on CAB held in Pune aimed to enhance their comprehension of financial management. e. SWIFT MODULE IMPLEMENTATION: Implemented for handling transactions of foreign central banks and other multilateral financial institutions. Throughout the year, the market borrowings of the central and state governments were conducted successfully despite challenges arising from global financial market volatility and geopolitical tensions. The market borrowing program for 2024-25 will be executed in an orderly fashion, considering the size of the government's budgeted fiscal deficit and evolving market conditions. The Reserve Bank will continue to ensure the smooth execution of the market borrowing program based on debt management principles while ensuring a stable debt structure.

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Dear @Aditii_0708, We would like to appreciate your efforts. Here is the detailed feedback on your answer: Introduction Competence 1. Relevance: Feedback: The introduction is relevant, providing a clear context regarding the challenges in public debt management during 2023-24 and referencing specific data. Area of Improvement with Proper Example: The introduction could briefly mention the strategies to be discussed, enhancing the setup for the body. For example: "In 2023-24, India's public debt management encountered significant hurdles due to elevated market borrowings, market instability, and evolving economic circumstances. The RBI employed various strategies to address these challenges." 2. Conciseness: Feedback: The introduction is concise and within the appropriate word limit, providing a clear summary of the context. Area of Improvement with Proper Example: To enhance conciseness, avoid unnecessary repetition. For example: "In 2023-24, India's public debt management faced challenges due to elevated market borrowings and financial market volatility. The RBI adopted various strategies to address these challenges." 3. Linking to the Body: Feedback: The introduction links well to the body by setting the stage for the detailed analysis of challenges and strategies. Area of Improvement with Proper Example: A clear transition sentence at the end of the introduction could improve linkage. For example: "The following sections will discuss these challenges and the strategies adopted by the RBI." Body Competence 1. Structural Competence: Feedback: The body is well-structured with clear, numbered points and subheadings that logically separate different aspects of the topic. Area of Improvement with Proper Example: Ensure uniformity in formatting and logical flow. For example, align the points under subheadings for better readability: "Challenges in Public Debt Management," followed by "Strategies Adopted by RBI." 2. Content Competence: Feedback: The content addresses all major challenges and strategies comprehensively and is relevant to the question. Area of Improvement with Proper Example: To avoid redundancy, consolidate similar points. For instance, merging details about interest rate fluctuations and volatility in the financial market under a single heading for clarity. 3. Use of Examples/Reports: Feedback: The answer uses relevant data and examples to substantiate points, such as mentioning specific figures for market borrowings and debt ratios. Area of Improvement with Proper Example: Integrate more direct references to specific reports or statements for added credibility. For instance: "According to the RBI's Annual Report 2023-24, the gross market borrowings amounted to ₹25.5 lakh crore." Conclusion Competence 1. Synthesis: Feedback: The conclusion effectively synthesizes the main points discussed in the body, summarizing the challenges and strategies. Area of Improvement with Proper Example: Strengthen the synthesis by explicitly linking back to the specific challenges and strategies mentioned. For example: "In summary, the RBI addressed challenges such as elevated market borrowings and financial market volatility through strategic measures like debt consolidation and retail investor initiatives." 2. Optimistic/Solution: Feedback: The conclusion is forward-looking and highlights the RBI's commitment to public debt management. Area of Improvement with Proper Example: Include specific future-oriented initiatives or recommendations. For instance: "Moving forward, the RBI should continue to adopt innovative debt management strategies and enhance fiscal discipline to maintain financial stability and promote economic growth." Language Competence 1. Grammar: Feedback: The grammar is generally correct, with clear and coherent sentences. Area of Improvement with Proper Example: Minor grammatical errors need attention. For example, "The RBI effectively managed combined gross market borrowings" should be "The RBI effectively managed the combined gross market borrowings." 2. Spelling: Feedback: Spelling is accurate throughout the answer. Area of Improvement with Proper Example: Ensure consistency in terminology and proper capitalization. For example, "g-securities" should be "G-Secs." 3. Word Limit: Feedback: The answer exceeds word limit. Area of Improvement with Proper Example: Maintaining conciseness and relevance throughout ensures adherence to the word limit without redundancy. Marks: 5/10 The answer is detailed, well-structured, and supported by relevant data. It can be improved by ensuring tighter linkage between sections, avoiding redundancy, and providing more explicit references to specific reports. The conclusion can be enhanced with more specific future-oriented initiatives. Minor grammatical adjustments and consistency in terminology will further strengthen the response.