At a time when India’s economy is growing at a steady clip, despite hiccups like the currency ban, there’s one economic indicator that is a looming threat: government debt.

At 67% of its GDP, India’s gross general government debt is higher than that of most other major Asian economies, except for Japan. A government typically borrows to spend on subsidies, infrastructure, and other social sectors.

In November, credit rating agency Standard & Poor’s (S&P) said it may upgrade India’s sovereign ratings if the level of government debt falls below 60% of the GDP. In the same month, another such organisation, Moody’s, said that government debt is “a key constraint” on India’s ratings. This despite the fact that prime minister Narendra Modi has been rooting for an upgrade since he came to power and has pushed critical reforms and flagship policies.

Now, even India’s central banker is concerned about the ballooning debt.

On Jan. 11, Reserve Bank of India governor Urjit Patel indicated that reducing government debt is critical. ”Our general government deficit (that is borrowing by the centre and states combined) is, according to IMF data, amongst the highest in the group of G-20 countries. In conjunction, the level of our general government debt as a ratio to GDP is cited by some as coming in the way of a credit rating upgrade,” he said during a speech in Gujarat. Patel added that more borrowing by the government can’t be “a short cut to long-lasting higher growth.”

Over the last few years, as the GDP steadily increased, the debt-to-GDP ratio has fallen.

The concern

High debt means the government’s interest outgo, too, is high. Already, estimates indicate an increased interest payout for India in the 2017-18 financial year.

“Interest payment on outstanding government debt and increased market stabilisation scheme bonds will put significant pressure on the fiscal deficit, in our view. Fiscal 2018 will be the first year since fiscal 2008 that the government’s interest payment burden will be larger than its fiscal deficit,” a Jan. 09 research report by Standard Chartered said.

Experts also say that the ultimate use of borrowed funds is critical. Typically, emerging markets have high debt since government spending is higher. But the borrowings must be channelled towards increasing investments and productivity. ”The end use of the debt is important, rather than the level of debt. If borrowed funds aren’t being spent on productivity, then there’s a problem,” explained Saugata Bhattacharya, chief economist at Axis Bank. “India isn’t in a bad situation, but the government needs to be careful in increasing borrowings going forward.”

Meanwhile, India’s GDP growth needs to be steady in the future so that the debt problem does not exacerbate, according to Charan Singh, a visiting lecturer at the Indian Institute of Management, Bangalore. “If for some reason, GDP growth rate falters, as is being argued by some rating agencies because of demonetisation,” Singh said in an email, “then, certainly, the debt-GDP ratio would become a concern.”