Is only Eurozone facing the heat of Debt?

November 15, 2011   ·   0 Comments

If you thought recent debt scenario from Eurozone & US was bad, look over to the other side of the Atlantic and you will be shocked to know that India stands first in Asia as most indebted countries in percentage to its GDP.

Let us look the Top 10 in debt companies of the world:

Let’s us look now where India stands: While India does not feature high on the list of most indebted countries in the world, it is ranked 1st in Asia.  Though the debt ratio has declined from 71% to 68% in 2011, it is still high compared to its Asian peers.

General government gross debt ( % of GDP)

The amount of India’s outstanding debt burden is expected to increase by 10.7% to Rs 43.5 lakh crore by March 2012 on account of high levels of market borrowing. Outstanding debt liability of the government would rise from Rs 39.3 lakh crore at the end of the current fiscal.  The main reason for rising debt is higher crude prices. At present almost 80% of crude oil demand is met through imports.

And what about the fiscal deficit? The budget for FY12 is at 4.6% of the GDP. As per the latest data, exports in Oct were up 11% at $19.9 billion; imports were up 22% at $39.5 billon thus trade deficit was at $19.6 billion, which is the highest in last 4 years. It is sure to be exceeded but will the Govt come forth and admit it?

www.stockssavvy.comImpact of increasing Debt on Economy: The buildup of public debt as a result of large and rising fiscal deficits is not a good sign.

Rising inflation and higher interest rates coupled with global slowdown have caused worries. On account of the moderation in industrial output, the government also lowered its GDP growth projection for 2011-12 to 8.6% from the earlier estimate of about 9%.

While India has strong growth prospects, care has to be taken to restrict debt levels as in times of slowdown, interest payments becomes a problem. Also debt increases the interest burden in the budget and restricts the government to take measures as seen in case of Fed. Hence the need of the day is proper fiscal prudence and governance. Currently S&P has given India a rating of BBB-, the lowest investment grade. In order to improve the grade, care needs to be taken to reduce or constrain the growth of debt.

Rajesh Singla

Rajesh is the founder & CEO of Stockssavvy, Stocks analyst,financial advisor by choice,software engineer by fate,biker,gamer,cricket lover n enthusiastic person. He believes in doing things not just to get by but to get Ahead...

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