India’s debt is somewhat worrying

Due to India's increasing debt, you will pay higher taxes. Our debt:-

2014: 54 lakh crore
2023: 205 lakh crore

People are doing politics around this data.
But, here are critical facts you should know:

[1] A good debt is: when you borrow to build productive assets.
Very similar to if you borrow to buy an iPhone, not a very smart move.

But, if you are borrowing to buy a good real estate, it might be a productive use.

[2] Similarly if a country takes debt (borrowings) to build productive assets, it could be considered as a good debt.

So how do we figure out: whether the money has been borrowed for productive/unproductive use.

[3] While there is no standard way to do this: there are a few indicators that could help.

[4] First, you could check for borrowing as a % of GDP. Since, 2005, this number has been going down.

In 2005: around 63%
In 2023: around 45%

So the government seems to have done a great job!

Source: World Bank data

[5] Second, you check: whether this borrowing is (external borrowing) or (domestic borrowing).

Because if we borrow externally more, our economy gets controlled by foreign players.

For this, check external borrowing as a % of GDP

Here, nothing much has changed since 2005. It has stayed around 20%
This indirectly means that: we are borrowing more domestically.

Going forward, it is quite likely that inflation (real inflation is going to be high).

While the government data always underplays inflation, you need to be sensible here, to understand the real inflation.

[6] Third, we need to check if the money that is being borrowed, is it being spent on productive vs unproductive things.

For this we could check Gross Fixed Capital formation data.

This in simple terms mean: how much money is being spent on productive things like investments, rather than consumption.

So high GFCF is good.
Here we are not doing well.
It used to be around 36% in 2008. It is now around 28%.

This points: most of our borrowings is actually going to pointless spending.

If things do not change: expect higher taxation and higher inflation.

Understanding how to deal with higher real inflation (and future proofing your investments) is going to be critical in the future. more  

View all 12 comments Below 12 comments
Are we talking about external borrowing by the Indian state?? We have enough reserve to pay the interest in my opinion. The major imports per year are only three items oil, medicine(API) and defence equipment. The total adds up to roughly USD 50 billion?? Roughly 4 lac crore which in ten years can't increase the debt by four times. We need to know the other imports???? Please share if anyone is aware about it. Of course electronics if we can't make the chips even after 70 years. more  
Many states are not transperant in their soending. Many states are extending freebies, at tax payers money. Obesiouly the burden on India will be high. more  
If you compare international prices of rupee to $was Rs 63 in 1914 and today is Rs. 84.Also compensates  the heavy cost of infrastructure and defense  spending to protect against China and Pakistan  and Indian Ocean and the achievements in space. You are confusing the masses. Modi Government is going the right way . Yahoo Mail: Search, Organize, Conquer On Sat, Apr 20, 2024 at 2:25 PM, Ajay Dutta wrote: more  
I am with Sri. Sudarshan Venkataramanan.Its is not fair to copy and paste someones post "as if it is original". Sri Ajay Dutta should have re-posted or acknowledged Sri Akshat Srivtva. Coming to the content of the post borrowing need not always lead to more taxes In 9 years the loan amount gone up 4 fold.Nothing to worry as long as the finances are in control and there is good governance. Its is just like housing finance or other personal finance.Loan amount is linked to your take home pay.If your take home pay increases your credit eligibility increases. The financial situation of India drastically improved prior to 2014 and 2023-24.Naturally the loan eligibility also goes up. As long as it is within the frame work it is fair and justified.. more  
Many States are raising loans ti pay salaries, pensions, DA, Medical bills or buying flashy SUV's for CM, Ministers and MLAs. How wise are such decisions. We are knowingly putting our future generations under huge debt. more  
Post a Comment

Related Posts

    • Airport charges getting ridiculous

      Travelling to Bengaluru airport has become more expensive. BIAL has imposed an entry fee for both private and commercial vehicles. Cabs to pay Rs 150 for up to 7 min, Rs 300 for more.

      By Ashima Gupta
      /
    • Underage Drunken Driving

      2 people killed day before here in Pune after a Porsche car, driven by a 17-year-old minor, crashed into their motorcycle in Pune. Accused granted bail within 15 hours. Look bail conditi...

      By Asha Rathi
      /
    • In life threatening situations can one counterattack a dog

      See attached video where a Cop shoots at dogs trying to maul a person in Philadelphia United States. What is the legal position in India for police in such scenarios? Didn’t find ...

      By Nikita Mehra
      /
    • Lift safety issues persist

      Yesterday in Noida a lift went through the tower roof because of maintenance negligence. See attached.

      By Radha Puri
      /
    • Hallmarking of Gold Jewellery

      This latest survey of LC is good as it helps consumers in not getting cheated or misled https:...

      By Aditi Mitra
      /
    • Why no red label on brain damaging products like Coke and Pepsi

      Why is the Government not putting front of the pack red labels on drinks like pepsi and coke. 10 year olds are drinking 5-6 glasses in a birthday party. Drinking Coca-Cola or Pepsi: This...

      By Shikha Chhabra
      /
    • Rising health insurance premiums

      Is a very serious issue and I am glad that LocalCircles has taken it up. In UP the survey was published in the navbharat times and i am attaching for this who read hindi.

      By RN Chopra
      /
    • Health insurance premium increase

      The reliable Indian Express paper is quoting our circle survey and saying that health insurance premiums for 52% people who have personal policy have risen by 25% or more in last 12 months.

      By Neelima Verma
      /
    • deteriorating services of health insurance services.

      This is really a true picture of current scenario. Despite increase in premium amount continuously in ;ast 2-3 years after covid, service standards have drastically gone from bad to worst by these ...

      By Alok Khullar
      /
    • Plight of health Insurance claimants

      I must complement localcircles management and members for being the most effective media in the country to quantify public plight on various issues and bringing it out. The attached sto...

      By Aditi Gupta
      /
    • Average temp going up by 5-8 degrees

      See attached friends. Average summer have gone up in India by 5-8 degrees in last 5 years. Like this we will have 50 degrees in Delhi soon. This is climate change for us.

      By Sudesh Rai
      /
Share
Enter your email and mobile number and we will send you the instructions

Note - The email can sometime gets delivered to the spam folder, so the instruction will be send to your mobile as well

All My Circles
Invite to
(Maximum 500 email ids allowed.)