India's NFS debt growth remains subdued in 2QFY21: Report

India'snon-financial sector debt growth remained subdued in 2QFY21 despite theeconomic disruption caused by Covid-19 pandemic, Motilal Oswal said in areport. 

Asper the Ecoscope report, owing to the pandemic and subsequent collapse ineconomic activity, a jump in the debt-to-GDP ratio across nations wasinevitable. 

However,a comparison between India and other major nations suggested that not only wasthe NFS debt-to-GDP ratio in India lower compared with other economies, butdebt growth was slightly better than in the previous quarters. 

Accordingly,India's NFS debt increased to 174.4 per cent of the GDP in 2QFY21 from 154 percent at the end of 2019, a jump of 20 percentage points (pp). 

Incontrast, it rose by as much as 33 pp of GDP in the US, 32 pp in the UK, 36 ppin Japan, and 25 pp in China. 

"Thecontribution of NFS debt growth to the surge in NFS debt-to-GDP ratio in Indiawas the lowest in 3QCY20." 

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Accordingto the report, the NFS debt growth in 2QFY21 (or 3QCY20) when compared tohistorical trends in the economy showed that India's performance was betterthan other nations. 

"India'sNFS debt growth of 10.5 per cent YoY in 3QCY20 was the highest in five quartersand marginally better than the record low growth of 8.2 per cent in4QFY20."

"Growthof 11.5 per cent YoY in US' NFS debt was close to the highest in 15 years andmore than double the average growth of 5 per cent in the past few years." 

InJapan, the report cited the NFS debt grew only 5.4 per cent YoY in 3QCY20, itmarked the highest growth seen in 24 years. In China, it stood at 13.1 per centin 3QCY20, a three-year high. 

"Themarginal uptick in India's NFS debt, vis-a-vis other major nations, may bebecause of the delayed government response since the credit guarantee schemewas announced by the government of India in mid-May'20, while it wasimplemented much earlier (Mar-Apr'20) in other nations." 

"However,the tepid NGNF growth in 2QFY21 confirms that the scheme has failed to yieldthe desired results in terms of boosting credit growth in the country. We haveearlier argued that Covid-19 may have an adverse impact on household income inIndia. Combine that with subdued debt growth, a strong revival looks highlyambitious."