Sovrenn Times: Macroeconomy Update | 19 August 2025
Debt-to-GDP Falls to 57%, But Interest Outgo Eats 36% of Revenues: CAG
India’s central government debt eased from 61.38% of GDP in FY21 (pandemic peak) to 57% in FY24, showing slower debt accumulation than GDP growth, according to the CAG’s FRBM compliance report. However, interest payments as a share of revenue receipts have risen steadily, from 33.99% in FY22 to 35.72% in FY24, after peaking at 38.66% in FY21. This ratio, a key gauge of fiscal health, highlights pressure on revenue due to high servicing costs. The report noted that debt sustainability turned positive in FY24, signaling stability despite the heavy interest burden. While debt moderation reflects fiscal discipline, rising interest costs could constrain future spending flexibility. The balance between growth-driven revenue gains and interest obligations remains a critical challenge for fiscal management.
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Unemployment Falls to 5.2% in July 2025, Female Workforce Participation Gains
India’s unemployment rate eased to 5.2% in July 2025, down from 5.6% in June, as per the latest PLFS data. The Labour Force Participation Rate (LFPR) rose to 54.9%, with rural LFPR at 56.9% and urban at 50.7%. Notably, rural female LFPR increased to 36.9% (vs. 35.2% in June), highlighting improving participation. The Worker Population Ratio (WPR)climbed to 54.4% in rural areas and 47% in urban areas, with female WPR at 31.6% nationwide. Rural women saw higher engagement (35.5% WPR) compared to urban women (23.5%). This bulletin marks the fourth monthly PLFS release, tracking shifts in labour dynamics across regions and genders.
18% Slab to Remain GST Revenue Backbone as Govt Proposes Two-Tier Structure
India’s GST revenues remain heavily dependent on the 18% slab, which contributes 65% of total collections, according to official estimates. In contrast, the 5% slab accounts for just 7%, while the 12% and 28% slabs contribute 5% and 11%, respectively. Under the Centre’s proposal, the GST regime will shift to a two-tier structure of 5% (merit goods) and 18% (standard goods), with a special 40% rate on 5–7 luxury/sin items. Nearly 99% of items in the 12% bracket are set to move down to 5%, while 90% of the 28% slab will shift to 18%. The rationalisation aims to boost consumption, simplify tax compliance, and build on the rising GST inflows, with average monthly collections climbing from ₹1.51 lakh crore in FY22 to ₹1.84 lakh crore in FY25. Since its rollout in 2017, GST registrations have more than doubled to 1.51 crore taxpayers.
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Farm Incomes at ₹10,218 & Rural Assets at ₹15.9 Lakh Set Benchmark Ahead of 2026 NSS Survey
The government will launch the 81st round of the National Sample Survey (NSS) in 2026, combining the Situation Assessment Survey of Agricultural Households and the All India Debt & Investment Survey (AIDIS). The exercise, to run from July 2026 to June 2027, will track farm and non-farm receipts, loan access, indebtedness, and asset levels across India. The last survey in 2019 reported average monthly farm household income at ₹10,218, with wages contributing ₹4,063 and crops ₹3,798. AIDIS 2019 pegged average rural assets at ₹15.9 lakh (₹22.1 lakh for cultivators vs ₹7.9 lakh for non-cultivators), while urban households averaged ₹27.2 lakh. Findings will help policymakers assess farmer welfare, rural debt pressures, and investment gaps after seven years. Meanwhile, the 80th NSS round on health expenditure is currently underway.
IBC Amendment Narrows NCLT Discretion, Aligns with SC Rulings
The Centre has proposed amendments to the Insolvency and Bankruptcy Code (IBC) to remove ambiguities highlighted in recent Supreme Court judgments. The bill clarifies that proof of default alone will be sufficient for insolvency admission under Section 7, curbing NCLT’s discretionary power, as raised in the Vidarbha Industries case (2022). It also addresses the Rainbow Papers ruling (2023) by reaffirming that government dues rank below secured creditors in the IBC waterfall. Further, in line with the Byju’s case, withdrawal of insolvency applications will not be allowed post-admission until the CoC is formed. Timelines for admission and resolution plan approval have also been prescribed to improve efficiency. By tightening definitions and procedures, the bill seeks to reinforce IBC’s intent of speedy, predictable, and creditor-friendly resolution.