The rise is mainly due to increase in short-term debt, commercial borrowings and NRI deposits
Impacted by an elevated level of current account deficit (CAD) and overall external financing requirements coupled with a deceleration in GDP (gross domestic product) growth and a depreciating rupee, India’s external debt is on a rising trend and has touched $390 billion as at the end of March 31 this year.
In its annual publication titled ‘India’s external debt: A status report 2012-13’ released here on Friday, the Department of Economic Affairs (DEA) maintained that it was a slew of these negative factors that resulted in the key external debt indicators witnessing some deterioration as at end-March 2013 as compared to end-March 2012.
According to the status report, India’s external debt stock stood at $390 billion, marking an increase of 12.9 per cent over $345.5 billion. The rise was mainly due to increase in short-term debt, commercial borrowings and non-resident Indian (NRI) deposits.
The country’s long-term external debt, the report said, was pegged at $293.4 billion to reflect an increase of 9.8 per cent, while the short-term debt, at $96.7 billion, indicated a rise of 23.7 per cent. With the long-term debt accounting for 75.2 per cent of the total external debt, the DEA said that it indicated the dominance of long-term borrowings in total external debt stock. Of the total external debt stock, the share of commercial borrowings stood at 31 per cent while short-term debt accounted for 24.8 per cent followed by NRI deposits (18.2 per cent) and multilateral debt (13.2 per cent). The government’s or sovereign external debt stood at $81.7 billion against $81.9 billion. Accordingly, the share of government debt in the total external debt was lower at 20.9 per cent against 23.7 per cent.
However, with the external debt-GDP ratio rising to 21.2 per cent from 19.7 per cent, the trend goes on to reflect mainly the depreciation of the rupee that led to a marginal contraction in the nominal GDP in dollar terms. “The composition of India’s external debt is undergoing a change with the share of multilateral and bilateral debt in total external debt rapidly diminishing over the years, while that of commercial borrowings and NRI deposits rising,” the report said. Despite signs of deterioration in traditional external debt indicators, especially the increasing share of short-term in total external debt and higher financing needs, the DEA status paper maintained that India’s external debt has remained within manageable limits as indicated by external debt-GDP ratio of 21.2 per cent and debt service ratio of 5.9 per cent during 2012-13. It noted that the country continued to be among the less vulnerable nations, with its external debt indicators comparing well with other indebted developing countries.