The COVID-19 crisis has affected economies worldwide, and India is no exception. India's Debt to GDP Ratio rose to 87.8% in 2021 and had declined to 87.4% in the year 2022. During the pandemic, the country's debt increased because the government had to provide financial aid to counter the pandemic effectively and quickly.
India's GDP is generated majorly through the service sectors, including employment activities like transport, tourism, healthcare, retail, etc. But more than half of the workforce in India is employed in the agricultural sector. Due to this balance, India has been in the red zone for quite some time now. However, India is trying to recover slowly and steadily. Currently, India's GDP is expected to remain stable at more than 7% for the next few years.
What is the Debt to GDP Ratio?
The Debt to GDP Ratio is an economic metric used to measure a country's ability to repay its debt. It compares a country's sovereign debt to its overall economic output of the year. Debt is the government's debt, i.e., a cumulative amount the government of the country owes to another nation. Whereas GDP, i.e., Gross Domestic Product, is the total value of goods and services gained in the country in a year.
A very low Debt to GDP Ratio indicates that a country's economy is stable enough to clear its debts without incurring more debts in the coming years. Some of the basic factors which affect a country's GDP ratio is -
- Interest rates
- Resource depletion rate
- Quality of life
- Economic inequality
- Underground economy
- Non-marketed activities
Debt to GDP Ratio Formula
To calculate the Debt to GDP Ratio, you can divide a nation's total debt by its Gross Domestic Product.
Debt to GDP Ratio = Debt/Gross Domestic Product
To find any country's exact debt and GDP figures, you can visit the official page of the World Bank. You can also find the statistics mentioned for the previous year on this page.
Top 10 Nations with High Debt to GDP Ratio
The top 10 countries in terms of Debt to GDP Ratio are-
Debt to GDP (As of 2021)
The Covid-19 Pandemic
The world is slowly coming back to normal as more and more countries are securing vaccine approvals and are getting their citizens vaccinated. However, on the other hand, the economic situation does not seem to be recovering at the same pace. Falling revenues combined with the pandemic aid relief funds have increased the global debt by $277 trillion.
Even the developing countries are now struggling with high Debt to GDP Ratios. Because of the pandemic, Canada's Debt to GDP Ratio rose by approximately 80%, the highest for any developed country. Australia, however, was an exception due to its early access scheme. During the pandemic, this scheme allowed the citizens to make a withdrawal from their superannuation, a social security fund. This timely implemented scheme allowed them to decrease their debt by almost 5%.
FAQs on Debt to GDP Ratio
Q.1. What is the Debt to GDP Ratio?
The Debt to GDP Ratio is an economic metric used to measure a country's ability to repay its debt. It compares a country's sovereign debt to its overall economic output of the year. Debt is the government's debt, i.e., a cumulative amount the government of the country owes to another nation.
Q.2. Which country has the highest Debt to GDP Ratio?
Currently, Japan has the highest Debt to GDP Ratio of 257%.
Q.3. Is low Debt to GDP Ratio good or bad?
A low Debt to GDP Ratio is good as it indicates that the country can pay off its debt. A high Debt to GDP Ratio indicates that the country is in debt and not producing enough to pay off its debts.
Q.4. Is there any country with no debt?
Some countries with low Debt to GDP Ratios are Hong Kong, Brunei, Kuwait, Solomon Islands, etc.