Who owes what, and can they pay?

Each line is what one kind of borrower owes, divided by a year's GDP. Household debt is home loans, gold loans, credit cards, personal loans and the borrowing of small family businesses, from banks and from finance companies. Company debt is what businesses outside finance owe in loans and bonds. Government is the Centre and the states together.

A rising line means debt grew faster than the economy, not that anyone borrowed recklessly. Incomes and prices both feed GDP, so high inflation shrinks these ratios even when nobody repays a rupee.

The gap between the two lines is credit from lenders that are not banks: finance companies, housing finance companies, bond markets and lenders abroad. The longer the gap, the more borrowing happens outside the banks the RBI supervises most closely.

Rupee amounts grow with prices and with the economy, so a line that climbs here can be flat as a share of GDP. Read this chart for scale and the one above it for weight. BIS also publishes these debts without its adjustment for breaks; both versions are in the data download.

The trend is where credit would be if it kept growing at its usual pace relative to the economy; the gap is how far it has run ahead or fallen behind. Studies across countries found that banking crises tend to follow long stretches when the gap sat above about ten points, so the global bank regulators in Basel suggested that banks start setting aside extra capital (the countercyclical buffer) once the gap passes two points, and the full buffer at ten.

The trend uses only the past, so it lags. After a long fall in credit, as in India after 2013, the trend itself sinks, and a modest recovery can show as a positive gap. The RBI treats the gap as one signal among several.

Debt as a share of GDP says how much is owed; the debt service ratio says how heavy it is to carry. It is the EMI question asked of a whole economy: of every ₹100 of income households and companies earn, how much goes straight to lenders. It rises when debt grows faster than income, when interest rates rise, and when loans get shorter.

Richer economies carry more debt because lenders trust their incomes and their courts, and because long home loans are common. A high bar is not by itself a danger sign: Japan's government owes about twice its GDP, mostly to its own citizens. What matters is who owes, in what currency, and whether incomes keep up.

Most rich economies are still working off the debt they built before 2008, so their gaps are deeply negative. The gap compares each economy with its own past, never with another's level, which is why it can be positive in India at a far lower debt than in Canada.

Borrowing in dollars is cheaper when dollar interest rates are low, but it carries a hidden cost: if the rupee falls, the same dollar debt takes more rupees to repay. These figures count dollar credit from banks anywhere in the world and from bonds sold abroad, to Indian companies and other borrowers outside the banking system.