India's debt-to-GDP ratio second-worst among emerging markets: Report

Government debt as a percentage of gross domestic product (GDP) for India is one of the highest among emerging markets (EMs), making the domestic economy vulnerable to foreign flows and global uncertainties.  According to an analysis by Motilal Oswal, India’s government debt-to-GDP ratio is 68.4 per cent, second only to Brazil. Asian peers such as Indonesia, Thailand and China have much lower government debt-to-GDP. “Consistently high fiscal deficits of over 6 per cent (in 33 of the last 37 years) have resulted in a much higher government debt-to-GDP ratio compared to other EMs,” says a note by Motilal Oswal. Some developed markets such as Japan, the US and the UK have much higher debt-to-GDP. However, these countries are better placed to refinance their debt.

Meanwhile, India’s corporate debt-to-GDP at 48.3 per cent is much favourable among EMs such as South Africa, Turkey and Malaysia. Corporate deleveraging has led to a 270 basis points (bps) reduction in India’s corporate debt-to-GDP from its peak of 51 per cent in 2013-14. However, other countries such as Russia, Brazil and China have seen a much sharper reduction in their corporate debt levels.