Analysts warn of “perpetual debt era” as repayment prospects fade
Global debt has surged to $300 trillion, three times the world’s GDP. Which countries are the most indebted, where does India stand, and what does this mean for the global economy?
Headline Figures
- Global Debt: $300 trillion (public, corporate, household combined)
- Global GDP: ~$100 trillion
- Debt-to-GDP Ratio: ~300%
- Debt Per Person: ~$38,000
Market Impact
- Bond Yields Rising: Servicing debt is costlier than a decade ago.
- Investor Caution: Higher risk premiums for debt-heavy nations.
- Currency Pressure: Fragile economies face FX depreciation risks.
- Equity Volatility: Debt fears dampen long-term growth sentiment.
Top 5 Debtor Nations (Debt-to-GDP)
- Japan – 250%+
- Greece – ~190%
- Italy – ~145%
- United States – ~130% (largest absolute debt: $34 trillion)
- Portugal – ~120%
India: Debt Snapshot 2024
Public Debt: Rs 258 lakh crore ($3.1 trillion)
Debt-to-GDP: ~81%
GDP: ~$4 trillion
Key Risks:
- High fiscal deficit limits spending flexibility.
- Interest payments = 25%+ of annual revenue.
- Rising oil import costs increase pressure on the current account.
Strengths:
- The majority of debt is held domestically, lowering external default risk.
- Strong GDP growth (6–6.5%) could keep debt manageable.
Expert Viewpoints
- “This is not about paying debt to zero—it’s about keeping the music playing without a sudden stop.” — Alan Peters, Global Macro Strategist
- “India’s debt isn’t in crisis territory, but fiscal discipline is essential in the next five years.” — Dr. Meera Kulkarni, Economist
The Bigger Picture
Debt has surged in response to repeated crises—the 2008 financial meltdown, the COVID-19 pandemic, and geopolitical instability.
With interest rates climbing, even wealthy nations will spend more on interest than on essential services like infrastructure.
Advanced economies with strong currencies can roll over debt indefinitely. Emerging economies like India must rely on sustained growth to avoid a spiral.
Fact Box: What Happens If Debt Becomes Unmanageable?
- Default: Government stops paying creditors (rare for major economies).
- Restructuring: Debt terms renegotiated to ease payment.
- Inflation: Reduces real value of debt over time.
