ranjan

The increasing global burden of private debt is largely is due to combination of business debt and household debt. Even though government debt grabs all the headlines, private debt is larger than government debt and has more impact on economic outcomes. Debt is a two-edged sword. Used wisely and in moderation, it clearly improves welfare. But, when it is used imprudently and in excess, the result can be disaster. For individual households and firms, over borrowing leads to bankruptcy and financial ruin.  When a private debt is high, consumers and businesses have to divert an increased portion of their income to paying interest and principal on that debt resulting into less spending and investment. That is a real part of what is weighing on economic growth. After private debt reaches high levels, demand gets suppressed. Most middle and lower income households (where the highest rate of debt growth has been) as also most small and medium sized businesses, pay much higher rate of interest