Page 84 - ES 2020-21_Volume-1-2 [28-01-21]

Does Growth Lead to Debt Sustainability? Yes, But Not Vice-Versa! 67

Figure 13: Relationship between public investment and private investment
13a. FY 1951 to FY 1990 13b. FY 1991 to FY 2019

Source: MosPI
Investment and GDP upto FY2011 is 2004-05 series and from FY 2011 to FY 2019 is 2011-12 series

2.29 To examine the robustness of the above findings, we also analyse how non-financial
corporate debt-to-GDP and bank credit change with changes in government debt-to-GDP. We
find no evidence of crowding out during FY 2001 and FY 2019, indicated by no correlation
between the two sets of variables (Figure 14).

Figure 14: Does higher government debt lead to lower corporate debt
over FY2001 to FY 2019?
14a: Relationship between change in 14b: Relationship between change in
government debt and change in corporate debt government debt and change bank credit

Source: RBI, IMF, MosPI

2.30 Similarly, we find no correlation between public sector savings and private investments by
the corporate sector or between public sector savings and private savings by the corporate sector
for the period FY1991 to FY2019 (Figure 15).