Thread by @svembu

India's NPA (bad debt) problem arose because India has run massive trade deficits which were funded with debt, very often dollar-denominated debt at the corporate sector.

We don't have the know-how to export to earn the dollars to pay back that debt. Trade policy ignored debt..

https://twitter.com/APanagariya/status/1304466301872676865

.. the NPA problem, contrary to Prof Panagariya's assertion is deep and structural and is directly linked to our persistent trade deficits.

We cannot fix our economy without fixing our trade policy (the absurdity of a massive labour surplus nation importing nail clippers) ..

.. alas Prof Panagariya demonstrates how economists obsess about GDP and essentially ignore debt.

The NPA problem is not a technical issue with bank or corporate balance sheets. It is a vital sign of structural problems with trade policy.

We have to get trade policy right..

.. Atmanirbhar is a structural solution to our economic issues. We have to use our massive surplus labour to produce the very goods that we consume. That will grow GDP without creating debt, particularly external debt, especially dollar-denominated debt that strangles us. 🙏

The US has run massive trade deficits too but the US dollar is reserve currency so their deficits become "money that enables global trade".

India does not have that luxury.

The US paid for its trade deficit by deindustrializing it's heartland and massive rise in inequality.