In­dia’s debt lower than best: IMF

In In­dia, pri­vate debt in 2017 was 54.5 per cent and govern­ment debt 70.4 per cent of GDP, a to­tal debt of about 125 of GDP against China’s 247 per cent of GDP

Financial Chronicle - - PLAN, POLICY - LALIT K JHA

In­dia’s debt is lower than the best or emerg­ing mar­ket economies in the world, a top IMF of­fi­cial has said as he cau­tioned that the global debt has reached a new record high of $182 tril­lion in 2017.

Vi­tor Gasper, In­ter­na­tional Mone­tary Fund (IMF) di­rec­tor of fis­cal af­fairs de­part­ment, said In­dia’s debt was sub­stan­tially less than the global debt as per­cent­age of world gross do­mes­tic prod­uct (GDP).

In In­dia, pri­vate debt in 2017 was 54.5 per cent of the GDP and the gen­eral govern­ment debt was 70.4 per cent of the GDP, a to­tal debt of about 125 of the GDP, ac­cord­ing to the lat­est IMF fig­ures.

In com­par­i­son, debt of China was 247 per cent of the GDP.

“So, it (In­dia’s debt) is sub­stan­tially less than the global debt as per­cent­age of world GDP,” Gasper said.

In­dia’s debt is below the av­er­age of ad­vanced economies and below the av­er­age of emerg­ing mar­ket economies, he said.

“There is a pos­i­tive re­la­tion be­tween the debt to GDP ra­tio and the level of GDP per capita. If you com­pare around the world with the best economies or emerg­ing mar­ket economies, the level of debt in In­dia is lower,” the top IMF of­fi­cial said.

The IMF is very much stress­ing that global debt at $182 tril­lion in 2017 is at a new record high, he said.

Debt in ad­vanced economies, since the global fi­nan­cial cri­sis, has in­creased quite sub­stan­tially while the pri­vate sec­tor has been very grad­u­ally lever­ag­ing, he added.

“If you look at emerg­ing mar­ket economies, that in­cludes In­dia, you see that pri­vate debt in the last 10 years has in­creased quite sub­stan­tially, although in the last two years, since the end of 2015, 2016 and 2017, there is a slow­down in the process of lever­ag­ing, but debt is very high and pub­lic debt is a very high as well,” Gasper said.

In the last few years in In­dia pri­vate debt has de­clined from al­most 60 per cent to 54.5. “So, it’s very sta­ble. So, what you do see is that emerg­ing mar­ket economies, which is where In­dia is, there’s a very fast buildup in pri­vate debt with a slow­down in the last two years, but In­dia is ba­si­cally steady. So, In­dia is not an emerg­ing mar­ket econ­omy where lever­ag­ing is pro­gress­ing fast,” Gasper said.

Ac­cord­ing to Gasper, in emerg­ing mar­ket economies pri­vate debt has risen much faster than pub­lic debt.

“Take China, for ex­am­ple. To­tal debt is 247 per cent of the GDP. But the di­vid­ing line be­tween what is pub­lic and pri­vate debt in China is blurry. This blur­ri­ness re­flects the very large num­ber of pub­lic units and cor­po­ra­tions, the com­plex lay­ers of govern­ment, and wide­spread sub-na­tional off-bud­get bor­row­ing,” he said.

“As a re­sult, es­ti­mates of 2017 pub­lic debt vary con­sid­er­ably: the of­fi­cial govern­ment debt fig­ure is 37 per cent of GDP, while the data re­ported in the lat­est World Eco­nomic Out­look show it at 47 per cent of GDP, and the ‘aug­mented’ debt mea­sure, which in­cludes more off bud­get bor­row­ing by lo­cal govern­ments, stands at 68 per cent of GDP,” he said.

As China works to com­pile a full gen­eral govern­ment bal­ance sheet, this pic­ture will come into clearer fo­cus, he added.

Gasper said China had sub­stan­tial govern­ment as­sets, re­flect­ing years of high in­fra­struc­ture in­vest­ment.

Th­ese as­sets are larger than its li­a­bil­i­ties, putting net worth – the dif­fer­ence be­tween as­sets and li­a­bil­i­ties – well above 100 per cent of the GDP, the high­est among emerg­ing economies, he said.

“This is a sig­nif­i­cant buf­fer when com­pared to to­tal debts of pub­lic cor­po­ra­tions, par­tic­u­larly con­sid­er­ing that pub­lic cor­po­ra­tions also have as­sets. So, while debt-re­lated risks in China are large, there are also buf­fers. More­over, the govern­ment is tak­ing steps to con­tain risks by rein­ing in off-bud­get bor­row­ing and strength­en­ing over­sight, re­sult­ing in a slow­down in the buildup of debt,” he said.

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