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According to a report by Motilal Oswal Institutional Equities, a 9.1% year-on-year growth in NFS debt and a 0.6% year-on-year decline in annualized nominal GDP led to an increase in the NFS debt-to-GDP ratio in the first quarter of FY21.
Within the NFS, general government debt (Center plus States) grew at a strong pace of 14.3% year-on-year over 30 quarters, according to the report.
Additionally, non-government non-financial debt (NGNF4) increased by 4.6% year-on-year in 1QFY21 (from record growth levels of 4% in 4QFY20).
Within the NGNF sector, household debt reached a near-record high of 6% YoY in 1QFY21 (8.9% in 4QFY20, but the slowest growth of 5.7% in 4QFY09).
Additionally, non-financial corporate (NFC) debt rose 3.7%, the second lowest level of growth at a record high of 1% in 4Q20.
“A look at long-term trends suggests the country’s debt growth weakened to single digits for the first time in two decades in 2QFY20, and COVID-19 failed to change that in 1QFY21. “, says the report.
Due to COVID-19 and the related collapse in economic activity, an increase in the debt-to-GDP ratio in all countries was inevitable.
However, the recovery in Indian debt growth in the first quarter of FY21 was only marginal compared to previous quarters, according to the report. NFS debt growth was the highest in 15 years in the US (at 11.7%), the highest in 11 years in the UK (at 10.2%), the highest in 24 years in Japan (at 4.6%) and the highest in 10 quarters in China (at 12.4%). Since India’s credit guarantee program was announced in mid-May 20 (later against other major countries), NGNF debt may rise faster in 2QFY21, he added.
