Fathoming the ‘Depths of Debt’
Debt size is a crucial determinant of financial stability in any economy. Unfortunately,
though, in India, there has been no measure to learn about the country’s total debt owing
Distribution of India’s total debt
by sectors (% of GDP)
General government (GG)
Non-financial corporates (NFCs)
22 February 2019
The Economy Observer
to the unavailability of the official estimate of non-government non-financial (NGNF) debt.
In this note, we thus attempt to bridge this gap and use data from various official sources
to project India’s total debt.
PRESENTING ESTIMATES OF INDIA’S NGNF, AND THUS, TOTAL DEBT
Our estimates suggest that India’s total debt stood at 149.8% of GDP (or USD3.9t) in
FY18 – the highest-ever level. While government debt remained elevated at ~68% of
GDP, NGNF sector debt was also at an all-time high of 81.4% of GDP in FY18. Within
the NGNF sector, while the corporate sector deleveraged – debt down from the peak
of 51% of GDP in FY14 to 48.3% in FY18, household debt touched a new peak of 33.1%
of GDP in FY18.
COMPARISON OF INDIA’S DEBT VIS-À-VIS 19 OTHER MAJOR NATIONS
A comparison of the debt statistics for 10 emerging markets (EMs) and 10 advanced
economies (AEs) suggests that, although India’s government debt is the second-
highest in the EM pack, its NGNF debt is on the lower side. Consequently, India’s total
debt is at the middle of the debt range of major EMs.
India’s total debt is ~150% of
GDP and there is no slowdown
in credit growth in 3QFY19
QUARTERLY ESTIMATES OF NGNF DEBT SUGGEST NO MAJOR SLOWDOWN
Apart from estimating India’s debt on an annual basis, we also project India’s NGNF
debt on a quarterly basis. Quarterly debt statistics for the government sector,
however, are not available. Notwithstanding the IL&FS default in late September
2018, NGNF debt in India continued growing unabated in 3QFY19, beating all the fears
related to the adverse impact on India’s financial system. Although credit growth of
~18% YoY for NBFCs (including HFCs) was at a five-quarter low (albeit still strong) in
3QFY19, it was at a nine-quarter high (~12% YoY) for banks. Consequently, NGNF
NGNF debt to GDP ratio is close
to an all-time high in 3QFY19
NGNF debt-to-GDP ratio (%)
credit grew 13.3% YoY in 3QFY19, only marginally slower than 14% in 2QFY19 and
much higher than sub-12% in FY17 and FY18.
INDIA’S DEBT INTENSITY OF GDP GROWTH IS NOT WORRISOME
Finally, India’s total debt has increased modestly by 4.5 percentage points (pp) of GDP
over the past three years (FY15-18), which is better than the serious deleveraging in
Russia and the massive increase of 22pp in China. Finally, a comparison of India’s
nominal GDP growth with total debt growth reveals that India’s debt intensity of GDP
as the growth in debt needed to produce an additional percentage
point of nominal GDP growth)
has not changed significantly over the past 15 years and
ranged between the best of 0.8x in FY11 and FY15, and the worst of 1.4x in FY09. Debt
intensity stood at 1.1x in FY18 – exactly the average of the highest and lowest levels
over the past 15 years.
– Research analyst
(Nikhil.Gupta@MotilalOswal.com); +91 22 3982 5405
– Research analyst
(Rahul.Agrawal@motilaloswal.com); +91 22 3982 5445
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.