Washington: Financing new social initiatives and development projects will benefit India's younger generations but this will require prudent use of public funds, the International Monetary Fund (IMF) has said. Economic development projects and enhanced social initiatives in the country will be vital in the coming years. But to generate the revenue needed to get them off the ground, India's debt -- among the highest in emerging markets -- must be reduced. "Despite some improvement in reported fiscal deficits, debt as a share of GDP remains little changed over the past decade partly due to increases in off-budget financing," it said in a report released on Monday (local time).

This large public-sector footprint also ties up financial resources that could otherwise be drawn upon for private investment. Reforms to improve budgeting and enhance transparency in fiscal reporting have a vital role to play in putting debt on a durable downward trajectory. Much of the discussion regarding fiscal policies in India focuses on its central and states' government deficits. However, a broader and more relevant measure of the government's fiscal position -- and its bearing on the economy -- is the public sector's borrowing requirement, which has risen to about 8.5 per cent of GDP, according to IMF estimates.