The International Monetary Fund’s director of fiscal affairs Vitor Gasper said that global debt reached a new high in 2017, topping the $182 trillion mark, but also said that India’s debt, in particular, is much less than global debt as a percentage of the world’s gross domestic product (GDP)–a positive economic sign that could benefit the Direxion Daily MSCI India Bull 3x ETF (NYSEArca: INDL).
“So, it is substantially less than the global debt as percentage of world GDP,” Gasper said regarding India’s debt, which is below the average of developed and emerging market economies. “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.”
Furthermore, its economy is experiencing strong year-over-year growth as it grew “8.2 percent year-on-year in the second quarter of 2018, above 7.7 percent in the previous three months and beating market expectations of 7.6 percent. It is the strongest growth rate since the first quarter of 2016, boosted by household spending, financial, real estate and manufacturing activities,” according to Trading Economics.
Gasper also cited that although private debt in India has increased the last decade, it has tapered off in recent years.
“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.
Nonetheless, the IMF director still views India as stable relative to other emerging market economies.
“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,” said Gasper.