Well, India from a few years now has been running
deficits.
You're running up debt. India before was not a country
with debt.
Now you're getting debt again
and it's going to be difficult for you to be
the great country you should be
if you do it. You know America ran up huge
debt and now it has a problem.
If India does that you will have a problem.
Indias deficit has been running for more than one year.
So yes, I know Indian politicians will say don't worry,
it's not too much as of
outsider. I'm saying if you don't stop the debt now,
it will get worse. This is an ominous warning from
American investor Jim Rogers.
If India runs up debt,
it'll have a problem, just like America did a few
months ago.
In the early months of
2023, there were headlines all over the place about how
the US may be running out of cash as it
neared its debt ceiling.
Is America going bankrupt? Was a common question asked to
analysts.
Even now, America's debt load is growing further.
In fact, Elon Musk said on Twitter just recently that
the US would go bankrupt soon if they didn't stop
overspending.
But where exactly does India stand on debt?
Let's understand in four points.
First, why had India's debt run up in the 1st
place?
Essentially, government's borrowings from markets through issuing bonds short up
during COVID because their expenditures mounted and revenues were drying
up.
This resulted in a fiscal deficit of
9.2% of GDP in
20/20/21. The government's gross borrowings jumped
77% since the government announced the stimulus package to aid
the economy.
Second, ratings agency Moody seems to echo dispute that the
government debt needs to be reduced aggressively.
According to a Reuters interview,
Moodys analysts say that while Indias fiscal deficit target for
2526 is reasonable, an aggressive reduction in government debt would
benefit a sovereign rating.
They say that interest payments account for a very high
share of government revenue but do little to promote economic
growth.
Also, India's government debt is higher than similarly rated peers.
Third of faster reduction of debt is important because the
interest burden of the government is now
11.62 lakh crore rupees. 25%
of the additional increase in expenditure of the government is
only due to interest liability.
And 4th and most important,
the government is aware of the problem and it's working
towards it.
In the budget speech, Finance Minister Nirmala Sitaraman indicated a
transition from using just fiscal deficit as a measure of
fiscal health to the debt to GDP ratio being the
anchor of fiscal management. She reiterated the Centre's commitment to
scale down the fiscal deficit target below
4.5% of the GDP by
2526 and said that from the year after,
the effort will be to keep the deficit such that
debt as a percentage of GDP will be on a
declining path.
So, hope this video gives you a quick lowdown of
the India death story.
For more such content, stay tuned to me.