IGI Logo

India’s debt growth remains weak in 1QFY22

Debt-to-GDP ratio eased to 170.5% of GDP from 177.8% in 4QFY21

* India’s non-financial sector (NFS) debt grew by 11.6% YoY in 1QFY22 (quarter-ending Jun’21), marginally slower compared to the nine-quarter high growth of 11.9% YoY in 4QFY21. Outstanding NFS debt rose to a fresh high of INR358t in 1QFY22. However, it eased to 170.5% of GDP (from 177.8% of GDP) due to normalization in nominal GDP.

* Within NFS, general government debt (Center + states) continued to grow strongly at 17.5% YoY in 1QFY22, while nongovernment, non-financial (NGNF) debt continued to grow decently, but at a six-quarter high of 6.1% YoY. Within the NGNF sector, household (HH) debt increased at seven-quarter high of 11.3% YoY in 1QFY22, but non-financial corporate (NFC) debt rose 2.6% YoY, only better than 0.6% YoY in the 4QFY21.

* An analysis of NGNF debt by lenders suggests that lending growth for Banks picked up and NBFCs’ loan book/corporate bonds (CBs) grew decently in 1QFY22. Loan book for HFCs, however, weakened significantly. Lending (adjusted) by Scheduled Commercial Banks (SCBs)/NBFCs to the NGNF sector grew by 7%/8.3% YoY in 1QFY22. Bond issuances grew at 9.6% YoY, while HFCs lending increased by just 1.2%.

* A comparison with certain other major economies (the US, the UK, Eurozone (EZ), Japan, and China) suggests that the debt-to-GDP ratio peaked out almost everywhere in 2HFY21 (4QCY20 or 1QCY21) and fell in 1QFY22 (2QCY21) due to the strong growth (led by base) in nominal GDP. While government debt in India grew at the fastest pace (vis-à-vis other economies), corporate debt growth was among the weakest.

India’s NFS debt grew by 11.6% YoY, but fell to 170.5% of GDP in 1QFY22:

Our estimates suggest that India’s NFS debt stood at INR358t in 1QFY22, up from INR351t/INR320t in 4Q/1QFY21. As many as three-fourths of the increase in NFS debt in 1QFY22 were attributable to the government sector – as corporate debt1 growth was very weak, but household leverage increased decently (Exhibit 1).

India’s NFS debt grew by 11.6% YoY in 1QFY22, marginally slower compared to the nine-quarter high growth of 11.9% YoY in 4QFY21 (Exhibit 2). As nominal GDP contracted by 3% in FY21, India’s NFS debt rose to a record high of 177.8% in FY21 v/s 154.2% of GDP at the end of FY20. With the normalization of nominal GDP (up 31.7% YoY), debt-to-GDP ratio fell to 170.5% of GDP in 1QFY22

To Read Complete Report & Disclaimer Click Here

For More Motilal Oswal Securities Ltd Disclaimer http://www.motilaloswal.com/MOSLdisclaimer/disclaimer.html SEBI Registration number is INH000000412

Above views are of the author and not of the website kindly read disclaimer