The Harsh Truth Behind Trump’s ‘Dead Economy’ Jibe at India
- Profile Traders
- Aug 25, 2025
- 12 min read
Updated: Sep 22, 2025
Trump unleashed a fierce attack on India, dismissing it as a “dead economy", blasting its steep tariffs, and lashing out at its Russia ties.
He said:
“I don't care what India does with Russia"
"They can take their dead economies down together, for all I care. We have done very little business with India; their tariffs are too high, among the highest in the world.”
India is not a dead economy. Far from it, the new India is emerging as the future growth engine of the world.
The real danger lies in the United States, where cracks are widening. If not managed wisely, the US economy could be staring at a steep fall.
In this article, we’ll uncover the truth — with hard numbers — comparing India’s rise with America’s decline. By the end, it will be clear which economy is powering ahead and which is inching closer to the edge.
The Interest Trap: When Rates Outrun Growth
Ray Dalio, one of the world’s greatest investors and the visionary founder of Bridgewater Associates, has spent decades studying how economies rise and fall.
His insights have guided governments, billionaires, and institutions across the globe. Ranked among the most influential thinkers in finance, Dalio has mastered the art of simplifying complex economic forces into timeless principles.
One of his most impactful contributions is a model to assess a nation’s debt risk, a framework that brilliantly reveals whether a country is financially strong or heading toward danger.
This model doesn’t just apply to the US or India, but to any economy in the world.
It focuses on four powerful indicators:
Debts Relative to Income
Debt Service Relative to Income
Nominal Interest Rates vs. Inflation Rates & Income Growth Rates
Debt & Debt Service Relative to Savings
A simple, yet extraordinary way to measure the true financial resilience of nations.
1) Debts Relative to Income
It basically tells us how much debt someone (or a country) has compared to how much money they earn.
If the debt is small compared to income, it’s usually manageable.
If the debt is huge compared to income, it becomes risky because paying it back feels like a never-ending struggle.
Imagine a college student named Rohan:
Rohan earns ₹10,000 per month, so his yearly income is ₹1,20,000.
He takes a loan of ₹3,00,000 to buy a used car.
👉 His Debt-to-Income ratio = ₹3,00,000 ÷ ₹1,20,000 = 2.5 (or 250%).
This means his debt is 2.5 times what he earns in a whole year.
If Rohan spent every rupee of his annual income only on repayment, it would take him 2.5 years to clear the loan (and he’d have nothing left for living expenses).
✅ In short: The higher the debt-to-income ratio, the harder it becomes to manage debt — whether for a student, a family, or an entire country.
2) Debt Service Relative to Income
It shows how much of your yearly income goes into paying interest + principal on debt.
In simple words → How big your EMIs are compared to what you earn in a year.
If EMIs eat up a big chunk of your income, you’ll struggle with daily expenses.
Imagine a college student named Rohan again:
Rohan earns ₹10,000 per month, so his yearly income is ₹1,20,000.
He buys a used car worth ₹3,00,000 on loan.
Suppose the bank asks him to pay ₹8,000 per month as EMI.
👉 His yearly debt service (EMI × 12) = ₹96,000.
👉 His yearly income = ₹1,20,000.
👉 Debt Service to Income = ₹96,000 ÷ ₹1,20,000 = 80%.
That means 80% of his yearly income is already locked in EMIs.
So, he’s left with only 20% (₹24,000 a year, or ₹2,000 per month) for food, rent, studies, and other expenses, clearly a financial strain.
For a nation, it means: How much of the GDP (income of the country) is used just to service debt (interest + repayment).
If a large part of the national income is going only into paying back loans, then little is left for development, welfare, or growth.
✅ In short: Debt Service Relative to Income = “How much of what you earn is eaten up by EMIs.”
3) Nominal Interest Rates Relative to a) Inflation rates & b) Nominal Income Growth Rates
It looks at whether the cost of borrowing (interest rates) is higher or lower than how fast prices and your income are growing.
If inflation & income grow faster than interest rates → debt feels easier to repay over time.
If interest rates are higher than income growth → debt becomes heavier and harder to manage.
Imagine Rohan, a college student:
He earns ₹1,20,000 per year (₹10,000/month).
He takes a loan for a used car worth ₹3,00,000 at 10% yearly interest.
Now let’s check two situations:
Case A: Income Growing Fast
Rohan’s salary grows by 12% per year (new income next year = ₹1,34,400).
Inflation is 6%.
Loan interest = 10%.
👉 His income is growing faster than the interest he pays → debt burden feels lighter each year.
Case B: Interest Higher than Income Growth
Rohan’s salary grows by 5% per year (new income next year = ₹1,26,000).
Inflation is 6%.
Loan interest = 10%.
👉 Here, interest on debt is growing faster than his income → debt feels heavier and repayment gets tougher over time.
If a country’s GDP (income) grows faster than debt interest costs, debt remains manageable.
But if interest rates outpace GDP growth, debt balloons and repayment strains the economy.
✅ In short:
Good Situation: Income grows faster than loan cost → debt shrinks in real terms.
Bad Situation: Loan cost grows faster than income → debt becomes a trap.
4) Debt and Debt Service Relative to Savings/Reserves
This measures how big your debt and yearly EMIs are compared to your savings or reserves.
If you have good savings, debt is less risky because you can use your savings as a safety net.
If you have little or no savings, even a small debt can feel crushing.
Meet Rohan again:
Yearly income: ₹1,20,000
Loan: ₹3,00,000 for a used car
Yearly EMI payments (debt service): ₹96,000
Savings in bank: ₹50,000
👉 Let’s check his risk:
Debt Relative to Savings = ₹3,00,000 ÷ ₹50,000 = 6 times his savings.
His total debt is 6x bigger than his savings, which is risky.
Debt Service (EMIs) Relative to Savings = ₹96,000 ÷ ₹50,000 = 1.92 (192%).
His yearly EMIs are almost double his total savings.
So, if something goes wrong (job loss, emergency), his small savings won’t be enough to cover his debt burden.
If a country has large reserves & savings, it can manage its debt better.
If savings are small compared to debt, even modest repayments can create a crisis.
✅ In short:
This indicator shows whether savings are strong enough to act as a cushion against debt.
Debt Test: Where Does India Stand?
To assess a country’s debt risk using Ray Dalio’s model, we need a few key numbers. These include the country’s total debt, income (GDP), debt service, interest rates, inflation, growth projections, and reserves, the building blocks for calculating each indicator.
India’s Total Debt
This is the total money India owes.
We need it to see how big the debt is compared to the income of country.
India’s current total debt is $2.19 trillion (as on August 2025)
India’s Income (GDP)
This is the total money India earns in a year (its GDP).
It helps us check if the debt size is small or huge compared to what the country earns.
India’s estimated GDP is $4.19 trillion as of August 2025
India’s Debt Service
This is the yearly cost of paying back debt (interest + repayments).
It shows how much of the country’s income is already committed to EMIs.
India’s debt service is $154 billion as of August 2025
Nominal Interest Rate
The average interest India pays on its borrowings.
We compare it with inflation and income growth to see if debt is becoming lighter or heavier over time.
The Current Repo Rate in India as of August 2025 is 5.5%
India’s Inflation Rate
Shows how fast prices are rising.
Important because if inflation is higher than interest, the real burden of debt shrinks.
India’s Inflation rate is 1.55% (as of August 2025), but we will take it as 2%
India’s Projected Growth Rate
How fast India’s GDP (income) is expected to grow.
Faster growth makes debt easier to handle, just like a salary hike makes a loan easier for you.
India’s projected growth rate is 6.3% (some estimates project growth up to 7%, but this is the lowest range selected by all entities as of August 2025)
India’s Reserves (Savings)
India’s foreign exchange reserves and savings.
These act like a safety cushion, if debt service is too high, reserves can cover the gap.
India’s reserve is $695 billion (as of August 2025)
📊 Step 1: Debts Relative to Income
Debt = $2.19 trillion
Income (GDP) = $4.19 trillion
Debt-to-Income Ratio = 2.19 ÷ 4.19 ≈ 52%
👉 This is moderate and safe. Many developed countries have >100% debt-to-GDP (e.g., US ~120%, Japan ~250%). India’s 52% shows debt is manageable.
Risk Level: 🟢 Low
📊 Step 2: Debt Service Relative to Income
Debt Service = $154 billion
Income = $4.19 trillion
Ratio = 154 ÷ 4190 ≈ 3.7%
👉 Only 3.7% of annual income goes to servicing debt. This is very healthy, leaving India with plenty of income for growth.
Risk Level: 🟢 Very Low
📊 Step 3: Nominal Interest Rate vs. Inflation & Growth
Nominal Interest Rate = 5.5%
Inflation = 2%
Real Interest Rate = 5.5 – 2 = 3.5%
Projected Income Growth = 6.3%
👉 Growth (6.3%) > Interest cost (5.5%) → India’s income is growing faster than the burden of debt. This makes debt easier to repay over time.
Risk Level: 🟢 Low
📊 Step 4: Debt & Debt Service Relative to Reserves
Reserves = $695 billion
Debt = $2.19 trillion → Debt/Reserves ≈ 3.15x
Debt Service = $154 billion → Debt Service/Reserves ≈ 22%
👉 India has strong forex reserves (~$695B). Even if shocks occur, reserves can cover almost 4–5 years of debt service.
Risk Level: 🟢 Safe
✅ Overall Assessment
India’s debt profile looks healthy and sustainable under Ray Dalio’s model:
Debt is moderate compared to income.
Debt service is very low relative to income.
Income is growing faster than borrowing costs.
Reserves provide a strong safety cushion.
⚠️ The only watchpoint: If growth slows or interest rates rise sharply, risks could increase. But at present, India’s debt risk is comfortably low.
The Same Debt Test: Where Does the U.S Stand?
These are the data required to do this assessment:
Total Federal Debt: $37 trillion as of mid-August 2025
Nominal GDP (Income): $30.5 trillion (2025 estimate)
Debt Service (Annual Interest Payments): $1 trillion (projected in 2025)
Nominal Interest Rate on Debt: 3.35% (average as of July 2025)
Inflation Rate: 2.7% (June 2025 CPI)
Reserves: $755.7 billion (includes reserve and gold)
📊 Step 1: Debt Relative to Income
Debt = $37T
Income (GDP) = $30.5T
Debt-to-Income = 37 ÷ 30.5 ≈ 121%
👉 Debt is larger than annual income, which is high compared to India’s ~52%.
Risk Level: 🔴 High
📊 Step 2: Debt Service Relative to Income
Debt Service = $1T
Income = $30.5T
Ratio = 1 ÷ 30.5 ≈ 3.3%
👉 Only ~3.3% of income goes to interest payments. This looks manageable, but the figure is rising fast due to higher borrowing needs.
Risk Level: 🟡 Medium
📊 Step 3: Nominal Interest Rate vs. Inflation & Growth
Nominal Interest Rate = 3.35%
Inflation = 2.7% → Real Interest Rate ≈ 0.65%
Growth = ~1.9% (2025 projection)
👉 GDP growth (1.9%) is lower than interest rates (3.35%). This means debt is growing faster than income, a negative signal.
Risk Level: 🔴 High
📊 Step 4: Debt & Debt Service Relative to Reserves
Reserves (including gold) = $755.7B
Debt = $37T → Debt/Reserves ≈ 49x
Debt Service = $1T → Debt Service/Reserves ≈ 132%
👉 U.S. debt massively outweighs reserves. However, because the U.S. dollar is the world’s reserve currency, America has more flexibility (it can print USD and issue debt globally). Still, relative to reserves, the numbers are very weak.
Risk Level: 🔴 Very High
✅ Overall Assessment (U.S. August 2025)
Debt vs. Income: Risky (too high)
Debt Service vs. Income: Manageable but rising
Interest vs. Growth: Risky (debt growing faster than the economy)
Debt vs. Reserves: Very risky (debt far bigger than reserves)
⚠️ Conclusion: By Ray Dalio’s framework, the U.S. is in a high-risk debt position. Unlike India, where growth and reserves provide a cushion, the U.S. carries excessive debt compared to its income and reserves.
The only buffer is the dollar’s global reserve status; without it, these numbers would be alarming.
"U.S. debt is growing nearly twice as fast as the public debt of the United Kingdom, more than five times faster than that of Japan, and ten times faster than the average for the four largest European states" - Ruchir Sharma, Indian American author, fund manager and columnist for the Financial Times, in his book "What Went Wrong With Capitalism"
India vs the U.S: The Debt Reality Check
India and the U.S. present two very different pictures under Ray Dalio’s debt risk model. India, despite being an emerging market, has positioned itself with lower debt, stronger reserves, and faster growth, putting it on a sustainable path.
The U.S., while still the world’s largest economy, carries high debt, low growth, and minimal reserves relative to its obligations. For now, the dollar’s global dominance masks America’s vulnerabilities. But if that privilege erodes, the U.S. could face a dramatic economic reckoning, while India continues to rise as a safe and growing economy.
Debt Relative to Income
When comparing debt to income, India stands in a much stronger position than the United States. As of August 2025, India’s total debt is about $2.19 trillion, while its GDP (income) is $4.19 trillion, giving a debt-to-income ratio of around 52%. This is well within safe limits for a growing economy.
In contrast, the U.S. carries a massive $37 trillion in federal debt against a GDP of about $30.5 trillion, giving a debt-to-income ratio of 121%. This means the U.S. owes more than it earns in an entire year. By Dalio’s standards, India’s debt load is low-risk, while the U.S. is in a high-risk zone.
Debt Service Relative to Income
Debt service shows how much of a nation’s yearly income goes into paying interest on its debt. India pays $154 billion annually in debt service, which is just 3.7% of its GDP. This is very healthy and leaves a large portion of income free for investment, development, and growth.
The U.S., however, spends nearly $1 trillion annually on interest payments alone. While this equals about 3.3% of its GDP, which seems similar to India’s ratio, the trend is alarming. U.S. interest costs are rising rapidly and could soon consume an even larger share of its income, especially if interest rates climb or borrowing keeps accelerating. India is comfortably very low-risk here, while the U.S. sits at a medium risk level that is trending upward.
Nominal Interest Rates vs. Inflation & Growth
This indicator looks at whether a country’s income is growing faster than its debt burden. In India’s case, nominal interest rates stand at 5.5%, inflation is around 2%, and GDP growth is projected at 6.3%. Since income is growing faster than the interest burden, India’s debt becomes easier to manage over time.
The U.S. situation is the opposite. Its average interest rate on debt is 3.35%, inflation is 2.7%, and GDP growth is only 1.9%. In other words, the U.S. economy is growing slower than its debt costs, which means its debt burden will feel heavier each year. India is in a low-risk growth-friendly position, while the U.S. is firmly in the high-risk category.
Debt & Debt Service Relative to Reserves
Reserves are the ultimate safety cushion. India’s reserves, including foreign currency and gold, are about $695 billion. With debt at $2.19 trillion, India’s debt is only about 3.15 times its reserves, and annual debt service is just 22% of reserves. This means India has enough backup to cover multiple years of debt payments if necessary.
The U.S., on the other hand, holds reserves of about $755.7 billion against an enormous debt of $37 trillion. This makes U.S. debt nearly 49 times larger than its reserves, and its annual debt service ($1 trillion) exceeds even its total reserves. By Dalio’s framework, this puts the U.S. in a very high-risk position.
Why the U.S. Survives Despite High Risk
By Ray Dalio’s debt-risk framework, India clearly appears safer than the United States. India has moderate debt, manageable interest costs, growth higher than debt costs, and a healthy reserve buffer. The U.S., on the other hand, is carrying dangerously high debt, rising interest costs, slower growth, and almost no meaningful reserve cushion when compared to its liabilities.
The only factor keeping the U.S. afloat is its unique position as the issuer of the world’s reserve currency — the U.S. dollar. Because the dollar is the backbone of global trade and financial markets, the U.S. can borrow almost endlessly, as other countries are willing to hold U.S. debt. This privilege allows the U.S. to run deficits that would collapse any other economy.
However, this special status is not guaranteed forever. If the world begins to reduce its reliance on the U.S. dollar, due to alternatives like the euro, yuan, BRICS or digital currencies, the U.S. could suddenly lose its safety net. Without the privilege of being the world’s reserve currency, the United States’ massive debt burden and weak reserves would be brutally exposed, potentially triggering a financial crisis.
Final Conclusion
The numbers make one thing very clear — the United States is in a dangerously fragile economic position, with debt far exceeding its income, slowing growth, and almost no reserve cushion. On the other hand, India is in a far stronger position, thanks to its lower debt levels, young and dynamic population, and stable leadership that is driving growth and resilience.
To be fair, President Trump is fighting hard to bring back revenue streams and strengthen America’s economy, and his concerns about rising debt are genuine. But targeting India with huge tariffs is not the right solution. India is a growth partner, not a threat — and building stronger trade ties could benefit both nations instead of creating new economic frictions.
⚠️ Caution & Disclaimer: All the data and analysis in this article have been prepared with the help of ChatGPT and cross-checked with multiple publicly available sources to ensure accuracy. However, if you notice any discrepancies or inaccuracies, please feel free to point them out.
This content is intended for educational and informational purposes only. It should not be considered as trading or investing advice. Always do your own research or consult a financial advisor before making any investment decisions.
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