Motilal Oswal Financial Services made a very interesting comparison where it found that although India’s non-financial sector (NFS) debt is still high if compared with other emerging countries, it is much lower than some major economies like the US, the UK, Japan, Eurozone (EZ), and China.
The report confirmed that the debt-to-GDP of major nations, except China, has peaked. In the US, UK, and EZ, the NFS debt was between 292 percent and 307 percent at their peak during the fourth quarter of the calendar year 2020 and the first quarter of 2021. In Japan, it was 430 percent of the GDP. China’s debt, on the other hand, surged to 271.2 percent in 3QCY20 before cooling down and then spiking again in CY22 to reach an all-time peak of 273.2 percent.
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India in contrast saw a 181 percent debt-to-GDP in 1QCY21 at the peak, which has since eased to 161.6 percent in the December 2022 quarter, making it the least leveraged nation among the bigger ones.
“India’s NFS debt rose 12.4 percent YoY in 3QFY23, similar to the growth witnessed in the past eight quarters. In real terms, NFS debt (using GDP deflator) grew just 5.5 percent YoY in 3Q, the highest in the past nine quarters but still less than the average growth of 8-9 percent witnessed during the pre-Covid period,” mentioned the report.
However, a comparative look at India’s debt and that of other emerging and developing countries shows that India is still deeply leveraged. Excluding India and China, the leverage of emerging economies was only 134 percent of GDP.
Other observations by Motilal Oswal include India's bank lending data to the non-government non-financial (NGNF) sector, which climbed 14.9 percent on-year in 3QFY23 (December '22 quarter). This was slightly below the decadal high growth of 15.5 percent recorded in 2QFY23.