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If 
India had total assets of Rs 1 crore, here’s how its entire financial situation would look like.
A thread on
financial prudence of Indian government.
India had total assets of Rs 1 crore, here’s how its entire financial situation would look like.A thread on
financial prudence of Indian government.
1/ India generates an impressive 20% returns on its assets.
Indian govt revenue (2018) ₹39.29 trillion is 20% of its GDP ~ ₹190 trillion https://en.wikipedia.org/wiki/Economy_of_India
Indian govt revenue (2018) ₹39.29 trillion is 20% of its GDP ~ ₹190 trillion https://en.wikipedia.org/wiki/Economy_of_India
2/ Unfortunately, India’s expenses are 30% higher than its income.
Indian govt expenses (2018) ₹52.03 trillion vs Indian govt revenue (2018) ₹39.29 trillion
Indian govt expenses (2018) ₹52.03 trillion vs Indian govt revenue (2018) ₹39.29 trillion
3/ If expenses > income, how does India sustain? Well, India borrows money.
Indian government’s current debt stands at 300% of its income (govt revenue) and 68% of its assets (GDP) https://www.indiatoday.in/diu/story/india-s-debt-is-300-of-its-revenue-will-the-budget-address-this-1561504-2019-07-03
Indian government’s current debt stands at 300% of its income (govt revenue) and 68% of its assets (GDP) https://www.indiatoday.in/diu/story/india-s-debt-is-300-of-its-revenue-will-the-budget-address-this-1561504-2019-07-03
4/ How much of this debt is foreign debt?
The debt of India as a whole (not just govt) is 20% owed to non-Indians.
https://dea.gov.in/sites/default/files/STATUS%20REPORT%202018-19.pdf
The debt of India as a whole (not just govt) is 20% owed to non-Indians.
https://dea.gov.in/sites/default/files/STATUS%20REPORT%202018-19.pdf
5/ The govt owes just 5% of its total debt directly to foreigners.
(However, that’s a misnomer because many of the banks that purchase govt bonds raise capital overseas. So in reality govt owes a lot more to foreigners) https://commodity.com/debt-clock/india/
(However, that’s a misnomer because many of the banks that purchase govt bonds raise capital overseas. So in reality govt owes a lot more to foreigners) https://commodity.com/debt-clock/india/
6/ Is foreign debt a problem?
Well, India’s imports 50% more than it exports. In 2018-19, India imported $514 Billion while exported only $330 billion. https://en.wikipedia.org/wiki/Economy_of_India
Well, India’s imports 50% more than it exports. In 2018-19, India imported $514 Billion while exported only $330 billion. https://en.wikipedia.org/wiki/Economy_of_India
7/ So if India is unable to finance its trade deficit, Indians may have to give up many of its imported luxuries (The biggest one being petrol, but iPhones too).
8/ But can’t India simply print rupees to pay its debt?
Well, India can print rupees to pay back national debt. But 2/3rd of its foreign debt is non-rupee currency denominated.
As you may have guessed, India cannot print US dollars.
https://dea.gov.in/sites/default/files/STATUS%20REPORT%202018-19.pdf
Well, India can print rupees to pay back national debt. But 2/3rd of its foreign debt is non-rupee currency denominated.
As you may have guessed, India cannot print US dollars.
https://dea.gov.in/sites/default/files/STATUS%20REPORT%202018-19.pdf
9/ So, to summarise:
- India’s expenses > India’s income
- India has growing debt
- India as imports > exports (that are financed through foreign currency debt)
- This is unsustainable (in the long run)
- India’s expenses > India’s income
- India has growing debt
- India as imports > exports (that are financed through foreign currency debt)
- This is unsustainable (in the long run)
10/ To make it sustainable, India has to:
- Increase its revenue (improve tax collection)
- Increase its exports (become more competitive)
- Reduce its reliance on imports (crude oil mainly)
That’s it. Hope you liked the thread :)
- Increase its revenue (improve tax collection)
- Increase its exports (become more competitive)
- Reduce its reliance on imports (crude oil mainly)
That’s it. Hope you liked the thread :)
