"Indeed, the economy seems locked in a downward spiral... Best capturing this stark reality is the astonishingly high interest-growth differential. The corporate cost of borrowing now exceeds the GDP growth rate by more than 4 percentage points, meaning that interest on the debt is accumulating far faster than the revenues that companies are generating," Subramanian wrote.
The paper said that the economy would continue its downward spiral if this process is left unchecked.
"The growth of consumer goods production has virtually ground to a halt; production of investment goods is falling. Indicators of exports, imports, and government revenues are all close to negative territory," it said. "These indicators suggest the economy's illness is severe, unusually so. In fact, if one compares the indicators for the first seven months of this year with two previous episodes, the current slowdown seems closer to the 1991 slowdown than the 2000-02 recession."