Economic data released by the Central Bureau of Statistics of India recently showed that india's economic growth rate in the fourth quarter of 2017 was 7.2%, higher than China's 6.8% growth rate in the same period. In recent years, India has attracted investment from all over the world with its low labor cost advantage, and the Indian economy has grown rapidly and has the potential to catch up with And surpass China. The World Bank and the International Monetary Fund predict that India will become the fastest growing country in the global economy in the next decade, but there are other hidden dangers behind India's rapid economic growth - the serious debt problem has begun to hinder economic development and needs to be solved urgently.
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The Times of India reported on February 23 that as of September 30, 2017, individuals or companies belonging to the "deliberate defaulter" group in India had owed more than 1.1 trillion rupees (1 rupee about 0.09 yuan) to banks. However, the reason behind this result has surprised many people.
India's big business "not paying back" has become a normal phenomenon, according to Reuters, Indian billionaire Vijay Mallya under the name of Indian Kingfisher Airlines in debt of about $1.4 billion; in addition, India's largest private hydropower company Jaypee Group has been owed about 670 billion rubles in debt has become a bad debt; but the most notorious is India's most indebted company Isa Group. Its debt had reached 88,000 crore, and it had to sell its refineries to Russia to pay off the debt.
However, these problems are just the tip of the iceberg, and as of June last year, the size of problem loans in India had soared by 4.5 per cent to Rs 9.5 trillion, or about $145.56 billion. The bad debt ratio in India's banking sector has soared from 3% in 2013 to nearly 10% today, second only to Italy globally.
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As a result of indian banks having found more than 9,000 defaulted accounts with total liabilities of more than Rs 26,000 crore, and the top 11 largest debtors are all in arrears of more than Rs 1,000 crore. Recently, Indian banks have filed lawsuits against many defaulted accounts.
The data also shows that these non-performing loans are growing at an alarming rate. It grew by about 27% from 2016 to 2017, following growth rates of 38%, 67% and 35% in the previous three years.
The sharp growth of non-performing loans in India has on the one hand limited the ability of banks to lend, and at the same time caused serious harm to economic development. If economic growth slows down, it in turn will affect the solvency of enterprises again, eventually forming a vicious circle. In order to save the serious default in the banking industry, the Indian government has made a shocking plan to inject 2.11 trillion rupees into state-owned banks in the next two years, but this huge amount of money can only rely on the issuance of bonds for financing, according to their plan, they will issue 1.35 trillion yuan of recapitalization bonds in the next two years, which will bring huge debt repayment pressure to the Indian financial sector!
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According to the current debt situation, India needs to spend a quarter of its fiscal revenue to repay the debt, which undoubtedly increases the burden on the Indian banking industry. India's top priority is to address and prevent further expansion of the scale, and it should not just start to catch up with GDP. If India's economy is to maintain sustained and rapid development, it is necessary to first get rid of the "moth" of the debt problem, and if the serious debt problem continues to deteriorate and cannot be solved, the consequences may be unimaginable! (End)