idune said:
India’s govt debt is at 60% of GDP
India’s current account deficit is about 6% of GDP or over $240 billion
Bangladesh govt debt is about 35% of GDP
Bangladesh enjoy a healthy current account surplus
That means because of debt financing Indian govt has less percentage of revenue for spending on 400 million plus people who live less than $1 dollar a day. By the way indian population in July, 2009 is est to be 1.17 billion.
Indian economy is suffering from as high as 6% of GDP as current account deficit. That is over $200 billion in current account deficit, is astronomical when 400 million Indians live under $1 a day and oil price is record low. Indian may jump on to say so what, other countries have even higher. But problem with that argument is India is no uncle sam who can print money without much consequence. And Indian does not have luxury like these other countries for better and able tax collection base.
On Contrary, Bangladesh enjoys healthy current account surplus. And we have less debt to GDP ratio therefore better percentage of revenue can be spend on economic improvement
A link would be appreciated. I just don’t understand why people don’t give links when they quote raw data.
Anyway, you may want to note this excerpt from the paper,
Bangladesh in 21st Century, presented at Harvard.
“In 1993, Bangladesh's total public debt amounted to Tk.725 billion. Ten years later, in 2003, it had more than doubled to Tk.1.53 trillion, and another 3 years later, it reached nearly Tk.2 trillion. These trends seem to indicate that Bangladesh's debt is not sustainable. However, expressing Bangladesh's public debt as percent of GDP provides a different picture as this ratio has actually decreased from 58 percent in 1993 to less than 47 percent in 2006. The picture improves further by looking at the trend of the ratio of nominal public debt to government revenues, which has decreased from 638 percent in 1993 to 438 percent. The only worrisome part is that the share of the domestic public debt continues to increase, which is reflected even more in terms of interest payments as percent of government revenues,
However, comparing the results with other low-income countries, Bangladesh is actually one of the highest indebted countries in terms of both net present value (NPV), debt to government revenues, and public debt service to government revenues. The only reasons why Bangladesh did not qualify for recent debt relief initiatives are due to a) Bangladesh's substitution of external debt with domestic debt (which started in the early 1990s), and b) the framework of recent debt relief initiatives focus on external public debt sustainability.
An analysis of Bangladesh's future debt sustainability under alternative macroeconomic scenarios shows that relatively small deteriorations in the macroeconomic scenario can easily threaten Bangladesh's fiscal sustainability. Keeping in mind that Bangladesh is a highly disaster- prone country, and that disasters are likely to increase due to climate change, the cancellation of Bangladesh's external public debt would not only serve as a shock absorber but also allow Bangladesh to use its scarce resources to achieve the MDGs. While Bangladesh is unlikely to face an unsustainable debt in macroeconomic terms, if approaching debt sustainability from a human and social development perspective, Bangladesh's debt is not sustainable simply because Bangladesh has more urgent needs to reduce poverty [My note: About 84% of Bangladeshi, live below $2 threshold] than to make external debt service payments, amounting even in the optimistic scenario, to more than $1.5 billion every year over the next 12 years.
Indeed, given that total public debt service payments amount currently to about 100 percent of government revenues,[My note: Bangladesh is therefore spending almost all its earnings to service debt] it is clear that these debt service payments can only be made as old debt is replaced by new debt, i.e. principal as well as interest payments are mostly covered by new loans [My note: This is called “Debt trap”, when you take loan to meet a previous loan. India & Argentina were under similar, or worse, situation in 1991]. The cancellation of Bangladesh's external debt would also be justified based on equity issues as considerable amounts of debt have been canceled under recent debt relief initiatives to less poor and less indebted countries if poverty and indebtedness is defined more appropriately[My note: In other words, Bangladesh is now seeking to have its external debt cancelled].”
The public debt in India is within a very manageable range, thank you very much. Public debt has two components, External, the most volatile component and the cause of much headache, and Internal.
India’s external debt(
$ 155 bill, 2007) exceeds its foreign reserves(
$ 199 bill, 2007) and is around
16.4% of GDP – something, very few developing countries have achieved. India’s debt service ratio in 2007 was
4.8, only second to China. However, corresponding figures(
$ 231 bill external debt & $
254 bill foreign reserve) for 07-08 are not that encouraging, primarily because of the recession, decrease in rupee value against dollar (about
57% of India’s external debt is denominated in USD) etc.
Your assertion that “because of debt financing Indian govt has less percentage of revenue for spending on 400 million plus people who live less than $1 dollar a day” is incorrect. India can cover its entire external debt at one go and still have some forex left to do some charity.
Compare this to Bangladesh’s
external debt(
$ 19.3 bill, 2007),
foreign reserves,(
$ 6.1 bill, 2007), debt service ratio(?) and something, which is absent in case of India – aid ($
45.990 bill since 1972 & $
1.166 bill for 2007 alone).
So while, foreign reserves of India exceed the external debt by
128%, it is just the opposite in case of Bangladesh. The external debt exceed the reserves by a whopping
316%. A true David v/s Goliath but unlike mythology, Goliath is predictably much ahead.
Current account balance is indeed favourable for Bangladesh, but for India it is within limits. Nothing alarming about it. Once again your assertion that “current account deficit, is astronomical when 400 million Indians live under $1 a day” is misleading. Current account deficit means, in layman’s term, that a country is importing more than it is exporting. It has nothing to do, directly at least, with how many people are living below $ 1 or $ 2 threshold. The deficit can be balanced by increasing export or decreasing import or both (agreed that it is easier said than done). If you disagree, then please show us how import, export balance directly results in poverty eradication. If it had been the case, there wouldn’t have been 84% Bangladeshis living below $ 2 threshold. After all, Bangladesh has current account surplus.
Your idea of printing notes to meet debt, is school level mistake. No country does that, because inflation in such a case will go through the ceiling. US and every other country, even India, stay away from that mistake. So yes, the argument of other countries having even more public debt than India, is good enough argument. If you don’t accept that argument then its your responsibility to explain what would a developed country do different from India to bring down its debt (external + internal)
