Economic Growth Metrics

“Same GDP, different load.” India and Japan both have a ~$4 trillion GDP. But the weight each economy carries is vastly different. ▪️ Japan: ~12.5 crore people ▪️ India: ~142 crore people GDP ≠ prosperity per person. That’s why per capita GDP matters: ▪️ Japan: ~ $33,800 ▪️ India: ~ $2,500 In India’s case, we’re rowing harder, with more people onboard, and uneven distribution of paddles. India has energy, youth, and ambition—but we still need better institutions, infrastructure, education, inclusion, and jobs to turn that scale into real progress Because growth isn’t just about numbers. It’s about how many people it meaningfully uplifts. Henceforth, As India grows, are we only chasing GDP milestones — or building the systems needed to make that growth sustainable and equitable? 📌 Follow Avdhesh Singh for more such interesting finance insights. #Finance #Investmentbanking #Linkedin

India budget preview FY27 • FY26 was driven by both fiscal and monetary stimulus when external headwinds had been mounting. On the fiscal front, both income and GST stimulus totaled 0.9% of GDP • This has had an impact on tax collections even as private demand has picked up. Hence, to achieve fiscal deficit of 4.4% in FY26, cutback on spending is inevitable to meet fiscal target • On a low base and rising demand, revenue collection outlook for FY27 is much more buoyant when non-tax revenues are expected to remain elevated. This gives government room to keep capex at 3.1% of GDP while continuing on the path of consolidation • The focus of the Budget should be on Ease of Doing Business and Deregulation (aligning customs) along with incentives to crowd-in private investment, in particular manufacturing • With change in anchor to debt to GDP, pace of fiscal consolidation is expected to be much more gradual. From 56.2% of GDP in Mar 2026, debt is projected at 50% (+/-1%) in Mar 2031 • This implies a fiscal deficit of 4.2% of GDP in FY27 which can potentially compress to 3.5% of GDP for achieving debt to GDP of ~50% by Mar 2031 (nominal growth of 10%) • However, rising repayments going forward (INR 5.4tn in FY27) would put upward pressure on gross borrowing (INR 16.5tn in FY27) and thus yields unless net borrowing (INR 11.6tn in FY27) is brought down or switches are conducted to change the duration of outstanding debt

Strong demand and a surge in gasoline prices pushed retail sales above estimates. That was an undeniably strong retail sales report by any measure. Overall retail sales rose 1.7% in March, following a revised 0.7% gain in February — the biggest monthly increase in a year. Twelve of thirteen categories rose, the most in months. Even as consumers had to spend more at the pump, spending on other items not only increased, but rose at a faster pace than expected. Excluding gas stations, sales still rose a firm 0.6%. Control-group sales — which feed directly into the GDP calculation — were up 0.7%, the strongest reading since August. There are two tailwinds that we think contributed to such a big upside surprise: 🔹Hiring was particularly strong in March following an unusually cold February, which should boost overall income and, in turn, spending. 🔹Larger tax refunds this year due to the new tax bill should have been a massive help for consumers, especially those living paycheck to paycheck. However, there are also reasons to stay alert that this spike in retail spending might be temporary: 🔻It is possible that, facing rising prices due to the war in Iran—which has pushed inflation expectations higher—consumers pulled forward their spending in March, no matter how high gasoline prices were. This shift in behavior has happened recently during the tariff saga, and we can't ignore it. 🔻Demand destruction, especially in goods like automobiles, often shows up with a lag. It could take two to three months to see the impact of the war, with the peak not occurring until at least a quarter later. Obviously, the positive news of a potential ceasefire or reopening of the Strait has helped lower energy prices significantly. However, they remain much higher than before the war. Because of these factors, while we think the economy can withstand this shock, we do not expect consumers to stay this strong for at least one quarter. Beyond that, if the impact of the war continues to fade, there will be more reasons to expect consumer spending to trend upward. For now, the new data on March's retail sales should add to GDP in the first quarter. Our current forecast of 2.2% quarterly growth looks much better now.

US retail sales for April: 💰 Total sales: +4.6% 🛍️ Core retail sales: +4.9% 📦 Non-store sales: +10.8% 🚘 Auto sales: +1.3% ⛽️ Gas station sales: +21.2% Another very robust month for retail, with overall sales up strongly. However, there are a few devils in the detail. First, the dramatic spike in gas prices has helped to push up spending. Excluding gas stations - where sales rose by a whopping 21.2% - overall retail sales growth was a still good, but more modest, 3.3% Second, inflation continues to flatter the numbers. On a volume basis, overall sales increased by 1.3% and core retail sales increased by 1.2%. These are actually good uplifts compared to recent volume growth, but they're nowhere near as impressive as the headlines. Third, some of the punchiness (in value and volume) was aided by higher tax refunds - which ran well ahead of last year. That's very helpful, but it is a temporary boost. Retailers should be pleased with the numbers and with the consumer resilience that underpins them. But there are still reasons to be cautious and ensure that retail discipline (in costs and execution) is exemplary.

This morning’s U.S. retail sales report landed squarely in “never judge a book by its cover” territory. Headline sales for March rose +1.4%, surpassing both consensus expectations and February’s +0.22% figure, but a deeper dive into the data reveals some concerning details: (1) Sales growth was highly concentrated in motor vehicles and building supplies (see accompanying chart), two areas likely to be among the most heavily affected by new U.S. tariffs; (2) The retail sales “control group,” which excludes autos, building materials and gasoline, and is considered a more precise gauge of consumer spending for the purpose of GDP calculations, increased just +0.4%in March, failing to meet the +0.5% consensus. What do these devilish details mean for investors? We think March’s favorable headline retail sales print is more likely a result of consumers accelerating purchases to get ahead of U.S. tariff implementation than a true indication of a rebound in consumer spending. This view is supported by the dramatic decline in nonstore retail sales growth, which collapsed from +3.2% in February to a meager +0.1% in March. Additionally, we anticipate that “hard” data (quantifying actual economic activity, such as retail sales) will soon begin to show the negative impact of trending weakness in “soft” data (such as consumer sentiment surveys) — perhaps beginning with releases covering the month of April. This could translate into continued market volatility, as deteriorating consumer resilience poses a potentially serious headwind to the broader economy.

Stunning figure from a new paper by Jonathan Berk and Jules van Binsbergen showing that, while government debt-to-GDP ratios are on a clear upward trend and reaching historically high levels (top figure), other plausible indicators of government indebtedness paint a very different picture (bottom figure): 🔹interest expense-to-GDP ratio (orange) 🔹debt-to-equity ratio (blue) Data are from 19 large countries: Argentina, Australia, Austria, Belgium, Brazil, Canada, Denmark, France, Germany, Greece, Italy, Japan, Mexico, Netherlands, Russia, Spain, Sweden, United Kingdom, and the United States. Read the full paper here: Jonathan B. Berk and Jules H. van Binsbergen (2026), Why Care About Debt-to-GDP?, National Bureau of Economic Research Working Paper No. 34629: https://lnkd.in/euM5Xjca This is the Abstract: "We construct an international panel data set comprising three distinct yet plausible measures of government indebtedness: the debt-to-GDP, the interest-to-GDP, and the debt-to-equity ratios. Our analysis reveals that these measures yield differing conclusions about recent trends in government indebtedness. While the debt-to-GDP ratio has reached historically high levels, the other two indicators show either no clear trend or a declining pattern over recent decades. We argue for the development of stronger theoretical foundations for the measures employed in the literature, suggesting that, without such grounding, assertions about debt (un)sustainability may be premature."

🇺🇸 Moody’s Downgrades U.S. Credit Rating: What It Means for Markets & the Economy The U.S. just lost its last AAA credit rating. Moody’s downgraded the nation to Aa1, citing rising debt, deficits, and political gridlock. Here’s what you need to know: Why This Matters: ✅ First Time in History: The U.S. no longer holds a triple-A rating (AAA) from any of the big three agencies (S&P 2011, Fitch 2023, Moody’s now). ✅ Debt Crisis Warning: Moody’s projects U.S. deficits will hit 9% of GDP by 2035 (vs. 6.4% today) due to: - Soaring interest payments - Entitlement spending (Social Security, Medicare) - Weak revenue growth ✅ Market Reaction: 10-year Treasury yields rose to 4.49% — signaling higher borrowing costs ahead. The Root of the Problem: 1️⃣ Unsustainable Fiscal Path - U.S. debt-to-GDP is ~120% and rising - Trump’s proposed tax cuts could add $4.2 Trillion+ to deficits - No credible plan to control spending 2️⃣ Higher for Longer Rates - Fed policy + sovereign rating downgrade = more expensive debt rollovers - Interest costs alone could hit $1.6 Trillion /year by 2033 Market & Economic Implications: 🔸 Treasuries Under Pressure: If demand weakens, US treasury yields could spike further. 🔸 Corporate & Mortgage Rates: Higher treasury benchmark yields drive corporate and mortgage borrowing costs higher. 🚨 The Bigger Risk: This isn’t just about Trump or Biden—it’s a structural crisis decades in the making. Without major reforms, the U.S. could face a debt spiral that becomes difficult to control (higher rates → bigger deficits → more downgrades). Krishank Parekh | LinkedIn

Japan 🇯🇵 likes a rising market. And it has real fiscal reasons to sustain one. Investors often point to Japan’s gross public debt-to-GDP ratio (>230%) as evidence of structural fragility. That framing is increasingly outdated. A more useful lens is Japan’s net consolidated public balance sheet. And specifically what Shinzo Abe’s policy architecture created over the last decade: A de facto leveraged sovereign wealth fund. This is what happened: ▶️ The Bank of Japan accumulated domestic equities at scale ▶️ The Government Pension Investment Fund doubled its equity allocation target to 50% ▶️ The state effectively borrowed at near-zero short-duration funding costs and allocated capital into long-duration risk assets In other words: Japan used its exceptionally cheap sovereign funding base to run a national-scale carry trade. And it worked. According to new research highlighted by Hanno Lustig and co-authors, this strategy generated annual excess returns of ~4.6% above funding costs from 2013–2023, equivalent to roughly 6% of GDP per year. ➡️So despite Japan’s continued primary deficits, net public liabilities fell dramatically: from 117% of GDP in 2012 to ~65% in 2025.⬅️ ❗️That is a remarkable fiscal repair story hiding behind an alarming gross debt statistic. The important takeaway for equity investors: Japan is now highly incentivised to sustain domestic equity market strength. Because the public sector now holds domestic equities worth ~41% of GDP. That means higher equity valuations directly strengthen the sovereign balance sheet. This helps explain why Tokyo’s push for corporate governance reform are everything but cosmetic. They are effectively fiscal policy transmitted through corporate governance. Japan these days is managing one of the world’s largest leveraged national investment portfolios. Which creates powerful structural alignment behind continued equity market reform and performance. As an investor with a major allocation to the Japanese equity market, I found this is a highly relevant story worth paying attention to. Based on a research note from Verdad Advisers (Dan Rasmussen) (+++Opinions are my own. Not investment advice. Do your own research.+++) 👋 Follow for calm thinking in noisy markets, and Friday Funnies when we’ve earned them. Calm is a strategy.

Bond Market - Loss of Confidence Jamie Dimon is warning that the US bond market is at risk of a significant disruption due to the country's rising debt and persistent fiscal deficits. He stated, "a crack in the bond market is going to happen," emphasizing that excessive government spending and continued quantitative easing have pushed the system toward instability. US Credit Rating Downgrade and Debt-to-GDP Comparison Moody’s recently downgraded the US credit rating from Aaa to Aa1, joining S&P and Fitch in lowering the country’s rating below the top tier. The downgrade was driven by concerns over the $36 trillion US debt, persistent large deficits, and rising interest costs, which are now "significantly higher than those of similarly rated countries". The US debt-to-GDP ratio stands at about 123% in 2025, ranking it eighth globally—higher than most advanced economies except Japan (with a much higher ratio), but above China (96%) and India (80%). Debt Sustainability and Cost of Borrowing The Congressional Budget Office (CBO) and other analysts forecast that US debt will continue to rise, reaching 156% by 2055 under current policies. Interest payments on the national debt are projected to nearly double over the next decade, reaching $1.8 trillion by 2035 and crowding out other government spending. The sustainability of high debt is increasingly in question: as debt grows and interest rates remain elevated, the US will devote a larger share of its budget to debt service, reducing fiscal flexibility and raising the risk of a fiscal crisis. However, risks remain: persistent deficits, higher inflation expectations, and geopolitical uncertainty could keep yields elevated or even push them higher, especially if investor confidence in US fiscal management erodes. Global Comparison The US debt-to-GDP ratio is among the highest in the world, surpassed only by a few countries like Japan. Compared to other developed markets, US borrowing costs are rising faster due to its unique combination of high debt and large, persistent deficits. Brief Takeaways Jamie Dimon warns of a looming bond market crisis if US fiscal policy does not change. US credit rating is now below the top tier at all major agencies, reflecting fiscal concerns. Debt-to-GDP is at 123%, among the highest globally, with projections for further increases. High and rising debt is unsustainable long-term, significantly raising risks of higher borrowing costs and bond market disruption mainly due to loss of confidence in US market by international and domestic investors . #USDebt #BondMarket #CreditDowngrade #FiscalRisk #TreasuryYields #DebtSustainability #MarketOutlook Jamie Dimon warns US bond market will ‘crack’ under pressure from rising debt - https://on.ft.com/3HldBQO via @FT

Here's a number that should alarm every American taxpayer: 20% of each federal tax dollar now goes to paying interest on our debt. Not defense. Not roads. Just the interest. It’s not sustainable. We are running a $1.9 trillion deficit during a time of low unemployment, moderate inflation, and record-high stock prices. Historically, deficits this large only belonged to wartime, pandemics or deep recessions. This is the subject of my latest podcast: Cam Harvey Through the Noise. https://lnkd.in/e3jenmy9 The real debt number is much larger than the $31 trillion headline ‘debt held by the public’. Once you include the Social Security Trust obligations that Washington conveniently excludes, it is $39 trillion - well above U.S. GDP. And the clock is ticking. In 2033, the Social Security Trust runs dry, triggering an automatic 20% cut to benefits. That's the moment political courage suddenly becomes possible. Until then, I don't expect meaningful action. So, what are the options? → Raise taxes: politically toxic, drags on growth.  → Print money to pay off debt: inflation is a regressive tax that punishes savers.  → Cut spending: limited room without touching entitlements.  → Grow our way out: by far the most attractive path. Productivity-driven growth is the one lever that expands tax revenue without raising tax rates, without inflation, without austerity. It's the only solution that leaves everyone better off. We talk a lot about the debt and spending. We should be talking just as loudly about growth. While the 20% of tax revenue being used to service debt is alarming, there are other red flags. Ferguson's Law warns that any great power spending more on debt interest than on national defense won't remain a great power for long. The U.S. just crossed that line. While the podcast is sponsored by Duke University - The Fuqua School of Business, the opinions are my own and not those of Duke University. Here is the podcast: https://lnkd.in/e3jenmy9 #Economics #NationalDebt #FiscalPolicy #Growth #Macroeconomics #SocialSecurity #Podcast