Government debt grows at 30-quarter high of 14.3%

The outstanding debt of Indias non-financial sector (NFS ) stood at Rs 322 trillion or 167.3 per cent of GDP in 1QFY21, up from around 153 per cent in the past few quarters.

According to a report by Motilal Oswal Institutional Equities, a 9.1 per cent year on year growth in NFS debt and 0.6 per cent year on year decline in annualized nominal GDP led to a jump in NFS' debt-to-GDP ratio in 1QFY21.

Within NFS, general government (Centre plus states) debt grew at a 30-quarter high pace of 14.3 per cent year on year, the report said.

Moreover, nongovernment non-financial (NGNF4) debt grew 4.6 per cent YoY in 1QFY21 (against record-low growth levels of 4 per cent in 4QFY20).

Within the NGNF sector, household debt grew at near-record lows of 6 per cent YoY in 1QFY21 (8.9 per cent in 4QFY20, but slowest growth of 5.7 per cent in 4QFY09).

Additionally, non-financial corporate (NFC) debt grew 3.7 per cent, the second lowest to record-low growth levels of 1 per cent in 4QFY20.

"A look at long-term trends suggests the country's debt growth weakened to the single digits for the first time in two decades in 2QFY20, and COVID-19 failed to change this in 1QFY21," the report said.

Due to COVID-19 and the related collapse in economic activity, a jump in the debt-to-GDP ratio across nations was inevitable.

However, the pickup in India's debt growth in 1QFY21 was only marginal versus the previous few quarters, the report said. NFS debt growth was the highest in 15 years in the US (at 11.7 per cent), the highest in 11 years in the UK (at 10.2 per cent), the highest in 24 years in Japan (at 4.6 per cent), and the highest in 10 quarters in China (at 12.4 per cent). Since the credit guarantee scheme in India was announced in mid-May'20 (later v/s other major nations), NGNF debt could grow faster in 2QFY21, it added.

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