The much publicized, celebrated and sometime criticized model (basic and not an exact/advanced/expansive as per Dalio himself) when applied in the Indian context reveals a few pointers. Though it appears to be a simplistic model but i feel that it does encompass a good macro level summation of the overall economic scenario. Especially the cyclic nature of the business cycle.
As per the model 3 factors diagnose/assess the economy :
Below is the break up of the short term and long term debt of India
Below is how the productivity and its growth rates (YoY and 5 year MAT) pan out
Quick observations :
As per the model 3 factors diagnose/assess the economy :
- Productivity growth
- Short term debt
- Long term debt
Below is the break up of the short term and long term debt of India
Quick observations :
- The short term debt situation does not look very promising. If we believe in the previous 2 short term debt cycles, then a correction is imminent and near. This might be either good( India increases productivity, reduces deficits and pays off the debt) or bad( Defaults or keep restructuring short term debt). More analysis is in order here. A cursory look of economic literature led to a paper which concluded that increase in short term debt is an indication of a weak economy and not its cause. India is, at least in the short term not too healthy, although the last quarter numbers have given some hope.
- The second graph is indicative since the data (from IDS World bank retrieved Dec 2013 ) is not really matching up and needs to be verified/validated by other sources. But what is definitely true is that the proportion of India's short term debt to its total debt has gone up significantly since 2006. Not a good sign since this can mean mostly refinancing/debt servicing/import obligations.
