{"id":2356,"date":"2021-02-15T15:21:00","date_gmt":"2021-02-15T15:21:00","guid":{"rendered":""},"modified":"2025-11-11T18:09:39","modified_gmt":"2025-11-11T12:39:39","slug":"5-trillion-economy","status":"publish","type":"post","link":"https:\/\/www.equentis.com\/blog\/5-trillion-economy\/","title":{"rendered":"India’s Giant Leap Towards Becoming a USD 5 Trillion Economy – Research & Ranking"},"content":{"rendered":"
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India is standing at the cusp of a new growth cycle. There are many enablers that will set the tone for this growth. The biggest enablers, Government and its reform-oriented approach are the most important. These are very much in place. Let us take a look at what other data points are pointing in the direction.<\/p>\n\n\n\n

Pointers which reveal India’s giant leap towards becoming a USD 5 trillion economy<\/h2>\n\n\n\n

Corporate Profit to GDP (%) is at a multi-year low<\/strong><\/span><\/h3>\n\n\n\n
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<\/strong><\/span><\/p>\n\n\n\n

 <\/strong>Source: <\/u><\/em><\/strong>Business Today. Numerator is PAT of BSE<\/a> 500 companies<\/em><\/p>\n\n\n\n

Corporate Profit to GDP ratio has been on a continuous slide since FY2008. This fall was mainly led by four sectors \u2013 PSU Banks, Oil and Gas, Metals and Telecom. PSU banks suffered due to rising NPAs, higher provisions, higher slippages and lower loan growth. Metals suffered due to wild swings in global<\/a> commodity cycles. Telecom suffered due to declining profitability as numerous players were engaged in a suicidal cost cutting race which destroyed profitability and resulted in many players exiting the market.<\/p>\n\n\n\n

One needs to note that consumption has risen as the new champion of growth in past few years. It has outpaced old-world and commodity-driven sectors such as metals and oil and gas. However, consumption is a scattered activity. A large number of giants that emerged over past few years which contributed to GDP did not contribute to BSE 500, which is the numerator in our metric. Large retail giants (Amazon, Flipkart), fintech companies (PayTM<\/a>), aggregators (Ola<\/a>, Uber), food delivery (Zomato, Swiggy) and numerous others are not listed. They generate significant employment, pay taxes and hence contribute handsomely to the GDP.<\/p>\n\n\n\n

As more and more of these \u201cnew-world\u201d businesses get listed, the Corporate Profit to GDP ratio will move higher.<\/em><\/p>\n\n\n\n

High growth to offset Government Debt to GDP<\/strong><\/span><\/h3>\n\n\n\n
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Source:<\/u><\/em><\/strong> Tradingeconomics.com<\/em><\/p>\n\n\n\n

India\u2019s Debt to GDP is neither too high nor too low. It lies somewhere in the middle. Economists have been divided whether India\u2019s debt level is comfortable or a matter of concern. However, India\u2019s (high) growth is a safe hedge against the debt. India is expected to grow much faster than the rest of the world and hence we can sustain higher debt levels. During the Asian crisis of 1997, India\u2019s debt to GDP ballooned from 67% to 83%, GDP growth was just 3.9%. Post that, we had several years of high growth and the metric came back to 66%.<\/p>\n\n\n\n

The interest rate paid by India has been historically lower than India\u2019s growth rate and hence we can rest assured that India will never default on its debt repayment. It has never defaulted in the past as well. Hence, we don\u2019t see India\u2019s debt-to-GDP ratio a being a concern.<\/p>\n\n\n\n

Bank Credit to private sector as % of GDP at multi-year low<\/strong><\/span><\/h3>\n\n\n\n
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Source:<\/u><\/em><\/strong> theglobaleconomy.com<\/em><\/p>\n\n\n\n

Credit given by banks to private sector has slowed down over past 4-5 years. This is because of two reasons:<\/p>\n\n\n\n