Page 42 - Nuvama | IC Report 2023

• DE-GLOBALISATION • DEREGULATION • DEBT • DEMOGRAPHY • DEMOCRACY

Of these policy choices, we think allowing higher inflation and suppressing the cost of capital (negative
real rates) may eventually be the path of least resistance. If so, and financial repression emerges as a
policy of choice over time, then countries with strong balance sheets, not-so-high indebtedness and
expanding workforce shall be the ones that attract capital. India is a no brainer; it ticks off all the boxes.

India debt cycle: From vice to virtue

India’s debt cycle is exactly opposite to that of the world. While the world doubled down on leverage
over the last decade, India was deleveraging. To reiterate, India is one of the few countries whose
debt accumulation has been minimal over the last decade. In fact, India’s debt cycle had been in the
opposite direction vis-à-vis the global trend even in 2000s. The excessive leverage of the noughties
resulted in a payback in 2010s.

190
Exhibit 10:
India levered up
in 2000s… 180

170
(% of GDP) 160

2000s 150

140
Mar ‘02 Mar ‘03 Mar ‘04 Mar ‘05 Mar ‘06 Mar ‘07 Mar ‘08
Global debt India debt

255
Exhibit 11:
…but has
deleveraged over 240
last decade
225
(% of GDP) 210
195
2010s 180
165
150
Jun ‘10 Jun ‘13 Jun ‘16 Jun ‘19 Jun ‘22
Global Debt India Debt
Source: BIS, Nuvama Research

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