How much India owes, who decides how tax money is shared, and why the rupee still isn't fully convertible.
Public debt is the total outstanding borrowing of the government — split into internal debt (borrowed domestically, e.g., government securities/G-Secs) and external debt (borrowed from foreign sources, e.g., multilateral institutions or sovereign bonds). India's public debt is tracked as a share of GDP, with the FRBM Act (Fiscal Responsibility and Budget Management), 2003 setting deficit and debt targets to keep borrowing on a sustainable path.
Article 280 mandates a Finance Commission every five years to recommend how the divisible pool of central taxes should be shared between the Union and the States, and among the States themselves, alongside grants-in-aid. The 16th Finance Commission, constituted for the period beginning 2026-27, was tasked with fresh recommendations reflecting updated population, income-distance, and fiscal-discipline criteria — its terms of reference notably had to account for the post-COVID fiscal situation and states' evolving revenue needs (including states like Andhra Pradesh still absorbing bifurcation-related fiscal stress).
Capital account convertibility refers to the freedom to convert domestic financial assets into foreign financial assets (and vice versa) at market-determined exchange rates, without restriction. India has full convertibility on the current account (trade in goods/services) since 1994, but only partial convertibility on the capital account — controlled and calibrated, per the recommendations of the Tarapore Committees (1997, 2006), given concerns about the volatility of unrestricted capital flows destabilising a developing economy.
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